Question

What are the main differences in the role of financial accounting and managerial accounting?

Answer 1

Financial Accounting	Managerial Accounting
(1) Objective of financial accounting is to determine the business results in the form of Income statement and Balance sheet	(1) Obective of managerial accounting is to provide the basis for Management Information system.
(2) GAAP and IFRS requirements apply to the FRF ( Financial reporting frame work)	(2) Guidelines framed by management shall apply, but not the GAAP or IFRS
(3) The kind of people interested in Financial accounting incl, Share holders, creditors, government, researchers and policy makers.	(3) Managerial accounting reports are only for Internal management and they are never shared to external stakeholders.
(4) Tools used for financial accounting includes, Income statement, Balance sheet, Ratio analysis ect.	(4) Tools used for Managerial accounting mostly includes, variance analysis, CVP analysis etc
(5) Purpose of financial accounting is to maintain a record of financial transaction.	(5) Purpose of managerial accounting is to assist the Internal management in the process of decision making.
(6) only the commited costs and explicit costs are recorded.	(6) Management accounting considers both explict cost and implicit cost to the extent they are relevant costs for decision making point of view