Accounting - V
Santosh_2102
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Running head: MANAGERIAL ACCOUNTING |
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Financial account and managerial accounts involves career paths that are different. Financial accounting can be described as a combination of all accounting information into the financial statements which includes the statement of financial position, the income statement among other while managerial accounting is described as the processes which are internal which are useful in accounting for the business transactions. Financial accounts provide its report based on the result of the whole business while the managerial account is more detailed and could base its report on the product, profit, geographical region, or a customer. In relation the information used to develop a report, financial accounting uses proven information that can be produced as evidence while needed while managerial accounts mostly deals uses estimates which can neither be proven or verified (Weygandt, Kimmel, & Kieso, 2015,).
The other notable difference is about the users of the two information where the financial is used both internally and externally by stakeholders such as managers and investors while reports in managerial accounting are used within the company for management purposes.it is a requirement that financial accounting reports to act in accordance with the accounting standard such as the generally accepted accounting principle ( GAAP) while in the case of managerial accounting the information compiled for internal consumption does not have to comply with any standards thus the reports could be informal. The training for the two types of accounting is also different as the financial accountants are trained as certified public accountants while the managerial accountants are trained as certified management accountants (Pistoni & Songini, 2017).
The difference between these two can be explained in the following points:
i. Aggregation: the financial accounting reports on the whole business results whereas managerial accounting provides a more detailed report on aspects such as product line, product profits and consumer base.
ii. Efficiency: Financial accounting majorly reports of an organization's profitability as opposed to managerial accounting that majorly reports on specific areas that show problems and provides a solution on how to fix them.
iii. Proven Information: financial accounting demands that there is precision in the maintenance of records that will provide proof of the legitimacy of the financial statements whereas managerial accounting records mainly happen with no order as deals are made once the offer is on the table and does not require facts to be proven.
iv. Reporting focus: Financial accounting is used in the generation of financial statements whereas managerial accounting is majorly used with estimates that a company can only speculate.
v. Standards: financial accounting is required by law to adhere to a certain number of accounting standards whereas managerial accounting does not have any accounting standards that it has to follow.
The financial accounting standards provide guidance in which the accounting transactions are to be recorded and reported. Examples of the financial accounting standard bodies include the International Accounting Standard Board (IASB) and Financial Accounting Standard Board (FASB) that give details on aspects such as the general principles of financial accounting, the presentation process, Assets and liabilities covered in financial accounting, equity, revenue, expenses, and Brad transactions.
In conclusion, managerial accounting focuses more on internal process and is used for internal decision making while financial accounting focuses on external matters and is used by external stakeholders such as lenders and investors.
References:
Pistoni, A., & Songini, L. (2017). Strategic Managerial Control for Servitization Strategy. Studies in Managerial and Financial Accounting, 111-224. doi:10.1108/s1479-351220170000032003
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting.
