Question

Managerial vs. Financial Accounting

Unlike financial accounting, management accounting is optional rather than required. It is considered a means to an end rather than an end in itself.

REQUIRED: What are your observations about managerial accounting?

Answer should 250 words.

Answer 1

The main difference between financial and managerial accounting is that mangerial is prepared taking internal stakeholders into consideration whereas financial is prepared taking external stakeholders in focus.

Financial accounting focuses on creating and evaluating financial statements that will be reported externally, like creditors and investors. In contrast, managerial accounting analyses and results are kept in-house for business leaders to use to drive decision-making and run the company more effectively.

Managerial accountants handle many facets of accounting. These include margins, constraints, capital budgeting, trends and forecasting, valuation and product costing.

Managerial accounting is the process of analyzing business costs and operations to prepare internal financial report, records and account to aid managers decision making process in achieving business goals. In other words, it is the act if making sense of financial and costing data and translating that data into useful information for management and officers within an organisation.

Managerial accounting means analyzing and recording business activities for internal company use in an effect to increase efficiency and productivity.

Managerial accounting involves preparing and providing timely financial and statistical information to business managers so that they can make day-to-day and short-term managerial decisions

The result of managerial accounting is periodic reports for the company’s department managers and CEO. For example, managerial accounting reports often include details of the company’s available cash, recent generation of sales revenues, the current state of the organisation’s accounts payable and receivable, and more.

The information found in managerial accounting is vastly different than financial accounting in a number of ways. While financial accounting reports tend to be based on historical data, management reports are primarily forward-looking.

Managerial accounting reports are also usually confidential and for internal use only, as opposed to financial accounting statements, which are publicly reported.

Also, instead of being calculated based on generally accepted accounting practices, they are calculated based on management’s informational needs.