Question

How do financial and managerial accounting differ?

What do financial and managerial accounting have in common?

Answer 1

1) ANSWER:

--Financial accounting has primarily focus on the financial statements that are distributed to stockholders, financial analysts, lenders, and others outside of the company; on contrary managerial accounting has primarily focus on providing information within the organisation so that its management can operate the organisation more effectively

--Financial accounting is precise and is required to adhere to Generally Accepted Accounting Principles (GAAP), however management accounting is usually more of a estimate or a guess, because most managers do not have time for exact numbers when a decision needs to be made.

-- Financial accounting is meant for external stakeholders, whereas management accounting is presented internally

-- In the case of financial accounting the unit of measurement is only dollars; but in case of management accounting any unit of measurement is followed

-- Financial Accounting is based on double entry system such as recording, classification of business transaction and summarizing etc. but management accounting does not follows the double entry system

-- Financial accounting is usually prepared for one year but management accounting is prepared as and when needed.

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2) ANSWER:

The financial accounting and management accounting have below given similarities:

-- The financial accounting and management accounting are parts of total accounting information system.

-- Both are concerned with financial statements expenses, revenues, assets, liabilities and cash flows.

-- Under the both system of accounts the economic events are dealt.

-- The economic events in financial accounting and management accounting are qualified only in terms of dollars

-- The financial accounting and management accounting are classifying and accumulating the accounting information for the preparation of financial statements.

-- Both are measurement and determination of costs for different accounting periods and even for different sections and departments.

-- Few databases are used for preparation of the financial statements and reports under both system of accounts.

-- The similar concepts and accounting principles are used in both system of accounts for the purpose of cost allocation and cost accumulation.

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