In this module, the discussion focuses on the differences between financial and managerial accounting. Besides simply reciting differences, you should also be able to articulate a rationale for at least some of the important differences.
There are numerous differences between financial accounting and managerial accounting. Describe what you think are the most important differences and articulate what is the critical reason regarding why those differences exist. In particular, discuss why it may not be as important to protect users of managerial accounting information, compared with users of financial accounting information.
Post by classmate 1
There are several differences between financial and managerial accounting. I think the most important differences to focus on are the timeframes the two use, the amounts each accounting measures use, and the need for protection of the data. Managerial accounting is used as predictor or projector of accounting measures to plan out future growth and possible investment avenues, whereas, financial accounting uses past already existing data to form a historical report. Financial accounting uses actual existing historical numbers, but managerial accounting uses hypothetical projections so the numbers are estimated. Because in managerial accounting the figures are hypothetical there is not much importance in protecting that information, however, for financial accounting with exact existing data there is a need to protect that information.
Bragg, S. (2022, April 30). The difference between financial and managerial accounting. AccountingTools. Retrieved September 15, 2022, from https://www.accountingtools.com/articles/what-is-the-difference-between-financial-and-managerial-acco.html
Post by classmate 2
- Differences between financial and managerial accounting:
- Managerial accounting: Focus on the organization’s internal financial processes. Financial accounting: Focus on the organization’s external financial processes.
- Managerial Accounting: Target is on short-term growth strategies relating to economic maintenance. Financial Accountants: Concentrates on long-term financial plans for business expansion.
- Managerial Accounting: Process of recording, maintaining, and reporting the company’s financial affairs, which shows the company’s clear financial position. Financial Managerial: Manages the finances and investments of different individuals, organizations, and other entities.
- Rationale for at least some of the important differences:
Managerial accounting reporting provides information that is aimed at helping managers within the organization to make well-informed business decisions. Managerial accounting gives transparency of the business insight into the variable and fixed costs, which is used by the managers to strategically cut down the cost and increase profits., while financial accounting is aimed at providing financial information to parties outside the organization.
- Describe what you think are the most important differences between financial accounting and managerial accounting:
Most important differences are in timing and efficiency. For instance, Managerial accounting reports are for internal distribution, reports are specific estimation of what is the cause of the problem and how to fix at short term which helps to take a faster decision that can lead to be more efficient. In the case of Financial Accounting provides financial statements internal and external of the Corporation, a long term however a most accurate as is based in results of the business.
- Articulate what is the critical reason regarding why those differences exist:
Managerial accounting is for internal view and to assist management to track costs to make informed decisions about how to allocate resources within a company.
Financial Accounting: It refers to the preparation of financial statements for a particular period with the motive of calculation of profit or loss during that given period. Further, it is based on the based on the past data and users of the financial accounting are outsiders like investors, banks, stake holders etc.
These differences exists because these two have distinct purpose. Financial Accounting objective is the profitability of the company, whereas managerial accounting has an overview of all the details product wise for external and internal review.
- Discuss why it may not be as important to protect users of managerial accounting information, compared with users of financial accounting information.
Financial Accounting reporting must follow certain standards. The FASB’s standard most important function is to ensure that accountants and other intermediaries involved in handling financial information create detailed reports, which are then shared with stakeholders. Following a consistent set of standards enables a more efficient market and economy so for this reason it is more important to protect financial information Vs Managerial accounting which is only handled internally.