There are numerous differences between financial and managerial accounting. Financial accounting is presented to the external audience, but managerial accounting is presented to the internal community of the company. Financial accounting uses actual numbers, whereas, managerial accounting uses estimated numbers. Financial accounting offers an analysis of the historical information; on the other hand, managerial accounting looks ahead. Financial accounting adheres to Generally Accepted Accounting Principles (GAAP), but, managerial accounting is based on estimates or guesses by managers. The similarities in financial and managerial accounting are quantifying results of business activities and transactions, both deals in cash flow, assets, liabilities, revenues and expenses, association with economic and business events, and both the systems accumulate and classify the accounting information for financial statements preparation (Ross, 2021).

The examples of reports used for financial reporting are income statements, balance sheets, cash flow statements, and statements of stockholders' equity. The income statement helps to determine the revenue earned or expenses incurred by the business. The balance sheet contains the details of assets, liabilities, and capital owned by the business. The cash flow statement determines the inflow and outflow of cash in operating activities, investing activities, and financing activities (Three Financial Statements, n.d.). Statement of stockholders equity determines the net worth of the organization which is calculated by subtracting liabilities from the assets. An example of a managerial accounting report is a profit and loss statement. The profit and loss statement lists the profits and losses and determines if the overall position of the company is in profit or loss.

Managers use accounting information for planning and controlling purposes. They determine the business's health with the help of an income statement. The financial strength is determined with the help of a balance sheet for making future planning of expansion or divestment. A cash flow statement can be used to attract investors so that the company can have significant reserves for expansion. Statement of stockholders equity is used to attract stockholders and increase the investment in the business. A profit and loss statement is used to identify the areas that are profitable and unprofitable. Significant efforts are made to control the unprofitable activities and plan to increase the profitable activities.