Question

What are some of the differences between financial and managerial accounting?

Answer 1

Solution:

There are various differences between financial accounting and managerial accouting. Some of differences are as under:

1. The purpose of financial accounting is to communicate financial position of the company, however managerial accounting is used for decision making.

2. Financial accouting is mandatory by various laws and regulations; however managerial accouting is not mandatory.

3. The financial accounting information generally used by external parties like, investors, regulators, tax authorities etc however user of managerial accouting are internal managment.

4. The financial accounting reports are prepared periodically like quarterly, annuall etc however there is not define period of managerial accouting reports. These are prepared as needed and ongoing.

5. Financial accounting focus on past transaction however managerial accounting focus on information to aid decision for future.

6. Financial accounting reports are reviewed by external auditors however there is no external review of managerial accounting reports.