Question

Provide introduction and conclusion for differences between Financial and Managerial Accounting.

Provide sources, if used.

Answer 1

Financial accounting tends to be more externally focused and its main goal is to inform stakeholders external to the firm, and who make decisions based on such information — an investor wants to know if the stock is a sound investment; the bank wants to know if the firm will be able to repay any monies lent to it, the government tax authority wants to know whether the firm is paying its due share of taxes (Big Laugh here but this is a ginormous debate in and of itself). In short, financial accounting deals with protecting the collective interests of the public by providing information that is timely, relevant and material to their decision making.

Managerial accounting tends to be more internally firm-focused wherein the goal of measuring, evaluating and presenting financial and closely related information aims to help firm decision makers to make more effective decisions regarding the firm. Moreover, the information generated from managerial accounting processes may be specific to That industry or even unique to that firm.

Financial accounting is prepared for external users, financial accounting places a large emphasis on following reporting standards. Depending on who the user is, external users have varying goals when reading the financial statements, so financial accounting will often cover the entire business. On the other hand, managerial accounting is prepared for internal users, so it is not necessary for the accountant to emphasize reporting standards. Instead, managerial accounting emphasizes relevance.

Financial Accounting, It is used to focus on the financial statement of an organization to its external stockholders, lenders and financial analyst, etc. In financial accounting, an accounting system that concentrate on the preparation of financial statement of an organization to provide the financial information to the interested parties.

Managerial Accounting, It is used to focus on providing information within the company so its management can operate the company more effectively. Managerial accounting, the accounting system which provides relevant information to the managers to make policies, plans and strategies