Question

Which of the following statements is FALSE?

		Financial accounting reports historical transactions.
		Managerial accounting focuses on reporting the consolidated results of the company as a whole.
		Managerial accounting reports do not have to conform to generally accepted accounting principles.
		Financial accounting helps investors and creditors make decisions.

Answer 1

False Statement -: Managerial accounting focuses on reporting the consolidated results of the company as a whole.

Financial Accounting - Financial accounting focuses on providing historical financial information to external users. External users are those outside the company, including owners (e.g., shareholders) and creditors (e.g., banks or bondholders). Financial accountants reporting to external users are required to follow U.S. Generally Accepted Accounting Principles (U.S. GAAP), a set of accounting rules that requires consistency in recording and reporting financial information. This information typically summarizes overall company results and does not provide detailed information.

Managerial Accounting - Managerial accounting focuses on internal users—executives, product managers, sales managers, and any other personnel within the organization who use accounting information to make important decisions. Managerial accounting information need not conform with U.S. GAAP. In fact, conformance with U.S. GAAP may be a deterrent to getting useful information for internal decision-making purposes. For example, when establishing an inventory cost for one or more units of product (each jersey or hat produced at Sportswear Company), U.S. GAAP requires that production overhead costs, such as factory rent and factory utility costs, be included. However, for internal decision-making purposes, it might make more sense to include nonproduction costs that are directly linked to the product, such as sales commissions or administrative costs.

From the above conclusion, We can say following statements are correct.

1. Financial accounting reports historical transactions.

2. Managerial accounting reports do not have to conform to generally accepted accounting principles.

3. Financial accounting helps investors and creditors make decisions.