Explain the distinction between managerial accounting and financial accounting. In your response be sure to indicate...

Explain the distinction between managerial accounting and financial accounting. In your response be sure to indicate which is prospective (planning) and which is retrospective.

Expert Solution

Differences between managerial accounting and Financial Accounting

Managerial Accounting	Financial Accounting
Management accounting is done for the purpose of internal managerial decisions such as shutting down a segment, make or buy decision or outsource decision etc.	Financial accounting is done for reporting purposes. Financial statements such as Income statement, balance sheet and cash flow are part of Financial Statements.
Management Accounting is done at various levels such as segment wise, Month wise, Product wise , area wise etc.	Financial Accounting is prepared for the organization as a whole. It may also include Consolidated statements.
Generally variable costing is used in management accounting	Generally Absorption costing is used in Financial Accounting
Management Accounting helps organization grow by providing details of problems and solutions for those problems.	Financial accounting does not provide any such insights.
Management Accounting records are generally not open for public and used only by management internally.	Financial Accounting records are open for public.
Management accounting is Future oriented. Preparations of budgets and forecast of future position are some of the activities in Management accounting.	Financial results relates to past. It is also called Historical records and shows what a company has done in the past.
Records can be maintained for any period of time. Such as a month, week, quarter year etc.	Generally Financial Accounting statements are issued when the accounting period is over. Although Interim Financial reporting is done quarterly, semi quarterly, monthly etc.
Management accounting concepts are not accepted by GAAPs	Financial Accounting is done by following principles of GAAP.
Management Accounting follows prospective approach.	Financial Accounting is based on retrospective approach.

ekkarill92 answered 1 year ago

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