Accounting: Managerial And Financial Essay

915 words - 4 pages

Managerial and financial accounting are two very different types of accounting. They differ so much, that many schools offer separate classes on both. The uses and users of both types of accounting vary as much as the information provided by each. In this paper, the differences between managerial and financial accounting will be discussed. The users and decisions that are able to be made with both will also be discussed.Managerial AccountingManagerial accounting provides financial analysis and further interpretations. This analysis and interpretation assist managers and other organization heads with establishing policies and decision. This will ultimately help with the controls of current and future organizational operations. Since managerial accounting has experienced the necessary changes as a result of the fundamental changes of private, public, and not-for-profit segments of the economy, the practice of managerial accounting has evolved over time as a reaction to these changes as well (Wilmshurst, 2005)."Since there are many challenges for management accountants, whom are responsible for deciding the best ways to provide information relevant to the successful management of an organization, managerial accounting is the branch of accounting that prepares internal financial statements and other accounting reports and analysis which will help managers to better perform their jobs" (Tracy, 2005).The internal accounting reports assist managers with planning, decision-making, and other control mechanisms. Some of these reports involve profit reports, which focus on margin and sales volume. Therefore, much of the information provided in these reports are considered to be confidential and are not distributed externally. Managerial accounting also provides information pertaining to departmental budgeting, the development and use of standard cost, as well as working closely with organizational managers on how cost is allocated (Tracy, 2005).Financial AccountingFinancial accounting provides valuation - what is a company worth to someone looking to invest in or sell the company? This is particularly important to external users, such as creditors, investors, and tax authorities. This quantitative information can be found in the company's financial statements. The balance sheet, income statement, statement of owners' equity, and statement of cash flows help users to evaluate the profitability and solvency of a company.Financial accounting reports transactions that have taken place in the past and is used by internal as well as external users. This GAAP supported method is focused on the company as a whole. By using various summary and performance reports, external users are able to gain visibility inside the company at a high level. These reports benchmarked against a company's sector and competition, gives external users a good diagnosis of the overall performance and health of a company.The Users of Managerial and Financial AccountingManagerial accounting...

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