Difference Between Financial And Managerial Accounting

833 words - 4 pages

The primary difference between financial and managerial accounting is that financial accounting is used for external members of the company; they do not control or run the businesses’ operations. An example of external members would be customers and shareholders of the business. On the other hand, managerial accounting is used for internal members in the company such as managers and officers. The internal members use managerial accounting to increase efficiency and effectiveness within their company. According to accounting4management.com, financial accounting and managerial accounting have several differences, but they both depend on the same data.

A major difference between financial ...view middle of the document...

For managers and for the company, it is more important to have a rough estimate of data in a timely manner rather than information that is precise. A company could suffer if they decided to wait for precise information rather than having a rough estimate. Data used in managerial accounting also has the flexibility to be less precise because the information is being used internally and for the companies’ personal use. Managerial accounting is not mandatory for companies to perform but is used for their own benefit. Financial accounting is concerned with precision; their information is focused on the whole company rather than segments within the company. Accountingtools.com mentions that financial accounting statements are of past transactions that have already occurred. It is crucial for financial accounting information to be accurate as it represents the accounts of the company for a given period of time, which is viewed by governments, lenders, and shareholders. It is important for financial accounting statements to be precise due for government audits and taxation purposes. Financial accounting statements are mandatory and must be in accordance with GAAP standards and rules.

Financial and managerial accounting are similar because both their data is used for a financial decision. According to Scribd.com, they both deal with similar financial accounts such as revenues, assets, liabilities, and equity. The demand for all accountants is increasing; it is projected that long-term employment should increase by 16% by 2020, as stated by according to education-portal.com. In reference to blog.aicpa.org, it has been stated that accounting salaries are on the rise and increased by 4.5% in 2011, with an average salary around...

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