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Homework answers / question archive / What are the similarities and differences between Financial Accounting and Managerial Accounting? Define Financial Accounting and Managerial Accounting

What are the similarities and differences between Financial Accounting and Managerial Accounting? Define Financial Accounting and Managerial Accounting

Finance

What are the similarities and differences between Financial Accounting and Managerial Accounting?

  • Define Financial Accounting and Managerial Accounting.
  • What are the differences between them?
  • What are the similarities?
  • Which one do you prefer?
  • Which one uses financial statements?
  • Which one is kept only within the company?
  • Which one is for investors?

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Answer:

  • Financial Accounting. Financial Accounting is used for external-reporting and all other users that are external to the Company such as but not limited to the investors, government authorities, bondholders and such as. It is more concerned on what happened in the past as it will involves making financial statements that will be available to the general public for them to make informed decision based on the Company's figures of its operation (income statement), financial status (balance sheet) and other pertinent financial information (statement of cash flows, statement of changes in equity and notes to financial statements).
  • Managerial Accounting. Managerial accounting is only used for internal users such as the management, accounting department, etc. It is more focused on future as it will generate report such as budgets, variance reports and other reports that will add value to the Company's future operation. The limitation of it is that reports generated by it may not be useful to the general public as it is customized for internal use only.
  Financial Accounting Managerial Accounting
Define Financial Accounting and Managerial Accounting.

Financial Accounting. Financial Accounting is used for external-reporting and all other users that are external to the Company such as but not limited to the investors, government authorities, bondholders and such as. 

It is more concerned on what happened in the past as it will involves making financial statements that will be available to the general public for them to make informed decision based on the Company's 

figures of its operation (income statement), financial status (balance sheet) and other pertinent financial information (statement of cash flows, statement of changes in equity and notes to financial statements).

Managerial Accounting. Managerial accounting is only used for internal users such as the management, accounting department, etc. 

It is more focused on future as it will generate report such as budgets, variance reports and other reports that will add value to the Company's future operation. The limitation of it is that reports generated by it may not be useful to the general public as it is customized for internal use only.
What are the differences between them?

Financial Accounting:

  1. For external use
  2. Focused on past and historical data

Managerial Accounting:

  1. For internal use
  2. Forward and future-looking data
What are the similarities? Similarities of Financial Accounting and Managerial Accounting is that they both add value to the Company. Financial Accounting helps its users to make informed decision that may generate funds to the Company while Managerial Accounting helps the Management for its decision like budgeting.
Which one do you prefer? If you are external users (investors, government authorities, bondholders and such), you must prefer Financial Accounting. If you are internal users (management, accounting department, etc.), you must prefer Managerial Accounting.
Which one uses financial statements? Financial Accounting uses and generated financial statements. -
Which one is kept only within the company? - Managerial accounting is intended for Company's use only and to be kept only within the Company.
Which one is for investors? Financial Accounting is for investors' use. -

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