Accounting Discussion

Fatri Clarke Discussion 3

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Fatri Clarke posted Jan 25, 2021 6:17 PM

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There are several differences between financial and managerial accounting. According to accounting tools, “financial accounting reports on the results of an entire business, while managerial accounting almost always reports at a more detailed level, such as profits by product, product line, customer, and the geographic region” (Accounting Tools,2021). Another difference according to accounting tools is “financial accounting reports on the profitability (and therefore the efficiency) of a business, whereas managerial accounting reports on specifically what is causing problems and how to fix them” (Accounting Tools, 2021).

As my late grandmother would say, “there are several ways of skinning a cat.”. Therefore, these are just two different ways for companies to account for money being spent. Being that managerial accounting is more detailed, chances are, smaller businesses and companies would probably be using it. With that being said, it is critical to have different accounting avenues to cater to companies of different magnitudes.

According to accounting tools, “financial accounting requires that records be kept with considerable precision, which is needed to prove that the financial statements are correct” (Accounting Tools, 2021). From time-to-time, things such as audits are done to keep everyone honest. Also, when dealing with a huge sum of cash or anything with any monetary value, one must keep an account of all the necessary paperwork that shows how each cent was spent.

 

 

 

 

Reference

Accounting Tools (2021). The Difference Between Financial and Managerial Accounting. https://www.accountingtools.com/articles/what-is-the-difference-between-financial-and-managerial-acco.html.

 

Discussion 3 - Tim Dean

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Timothy Dean posted Jan 25, 2021 9:57 PM

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Financial accounting and managerial accounting may sound very similar and have some similarities however there are also several differences between the two accounting methods. In general, financial accounting refers to the aggregation of accounting information into financial statements, while managerial accounting refers to the internal processes used to account for business transactions. (Bragg, 2020) This week we will discuss those differences and elaborate on some of the main differences between the two.

Let’s first start with financial accounting. Financial Accounting is the process used to provide financial data to external individuals. What this means is in financial accounting the reports that are created are given to the public and stockholders, so they do not necessarily work for the company, as a means for them to make investing decisions based on how the company is doing. Financial Accounting also uses historical data to report information that has happened in the past whether it be during a quarter, semi annually, or annually. The reports that are generated during the financial accounting process must abide by the accounting standards set forth depending on which standard is being used based on where the company is located. With these numbers being produced based on historical data they are actual numbers and not estimates. All of these reports as stated above are ran and calculated for a certain period of time. With these reports being created using historical data it means that all of the data in the reports have already occurred in the past.

Now let’s talk about managerial accounting. Managerial accounting is a process used to create reports for internal managers of a company. These reports are generally not shared with the public. Managerial accounting uses estimates of a company going forward. Managerial accounting also generally creates these reports on a monthly basis. Where these reports are only being used internally in a company they do not have to abide by any accounting standards. The individuals in a company that create these reports are free to use any information they need to come up with the numbers to look ahead for the company to be able to present to the managers of the company.

To summarize the differences between Financial accounting and managerial accounting let’s look at them side-by-side. Managerial accounting is used strictly for internal purposes, while financial accounting provides financial information based on accounting standards. Managerial accounting frequently looks ahead, while financial accounting offers analysis of historical data. Managerial accounting typically runs a variety of operational reports throughout the month, while financial accounting runs financial statements at the end of the accounting period. Managerial accounting uses estimated amounts, while financial accounting only uses actual numbers. (Girsch-Bock, 2020)

The information in financial accounting needs to be protected as it is actual data created from a companies results. This information is being used for everyday people to make investing decisions. The information for managerial accounting is just historical data that internal employees use to make decisions about how to operate within the company. As a result, the handling and publishing of financial accounting information should be handled with a great deal of care compared to the data used in managerial accounting.

Works Cited Bragg, S. (2020, 12 December). The difference between financial and managerial accounting. Retrieved from https://www.accountingtools.com/articles/what-is-the-difference-between-financial-and-managerial-acco.html Girsch-Bock, M. (2020, September 30). How Managerial and Financial Accounting Differ. Retrieved from https://www.fool.com/the-blueprint/managerial-accounting-vs-financial-accounting