This website uses cookies to ensure you have the best experience. Learn more

Explain The Difference Between Financial And Management Accounting, The Fundamentals Of Management Accounting. Explain How Costs Are Classified Us

1076 words - 5 pages

There are two different branches of accounting which are managerial accounting and financial accounting. First the managerial accounting, it the department which issues reports for internal managers. These reports are used for planning, forecasting and decision making.
Financial accounting is the department that issues reports for shareholders or any organisation outside the company. These reports show how the company was performing the previous years.
The table below will clarify the differences:
Description Financial accounting Managerial accounting
Users Financial accounting shows how the business is performing to people who are not working inside the organisation. Managerial accounting ...view middle of the document...

Information is always an estimate or a guess.

Managerial accounting has some rules or fundamentals which regulate the process. Managerial accounting is only used internally. Internally means inside the organisation only, moving data from one department to another or information about a certain department performance. Obviously, it is mainly used to issue reports to managers. These reports can be regarding a single department, more than one department or the whole organisation. Information is used from present data, this data is used to know the current performance and it helps in forecasting for future performance. It also helps in problem solving, since reports could be issued daily, weekly or monthly it will be easier to locate the threats and deal with it. Also due to the frequent reports, it helps in controlling the company’s accounts and helping in planning.
Many accountants have written books about fundamentals of managerial accounting. However I explained only the basic rules of managerial accounting. Differences between financial and managerial accounting are pretty clear. Managerial is mainly internal and it is obvious from its name, it is mainly used by managers. While financial is for external purposes. Stockholders, investors and external organisation should not interfere in any internal situation so that’s why the company issues an easy formatted report to make it easier for them to understand it. Financial accounting is more accurate than managerial accounting as it is based mainly on old information.
To sum it all up, accountants have created these division to help the company maintain its position or improve it. Managerial accounting is more complicated because it is more internally.
Task 2
Costs of production are classified into different categories. This classification depends on the purpose of the cost. The first classification is the fixed, variable and semi fixed costs. This also can be described as cost behaviour.
• Variable costs: it is the costs that change by any change in the volume of production. For example, salaries, utility bills or cost of material.
• Fixed costs: that kind of costs is the same does not change even if the production was changed; it has to be in a certain time frame. Examples of fixed costs are rent and rates, insurance or fixed...

Find Another Essay On Explain the difference between financial and management accounting, the fundamentals of management accounting. Explain how costs are classified us

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

Using examples, explain the difference between obscene and indecent materials

890 words - 4 pages so many people would be as offended. From being in radio, I can remember an obvious instance in which we talked about a performance by Janet Jackson at the super bowl. Her breast popping out of her outfit could be deemed as "Patently" offensive, indecent material presented over the airwaves because many people were watching and it was on cable television. So I can clearly state that the main difference between the two, is that obscene material

Code of Ethics in Management Accounting and Financial Management

516 words - 2 pages Code of Ethics in Management Accounting and Financial Management When faced with major problems and dilemmas in management accounting and financial management, practitioners look to the 'standards of ethical conduct' for practitioners of management accounting and financial management. While looking at ethical standards one has to look at four different areas they are competence, confidentiality, integrity, and objectivity. These four areas

• Explain how the EU and the US coped with the recent financial crisis

764 words - 3 pages high-quality borrowers and to monitor loan performance more carefully. The US federal bank regulators have issued tighter guidance over how riskier mortgage borrowers are to be qualified for loans. As a result, hybrid subprime loans with teaser rates are no longer being made. The governance structure of the risk management system needs to be improved in financial firms in which the incentives are biased toward returns rather than the

International Business Financial & Management Accounting

6097 words - 24 pages , Japanese, etc., financial and management accounting practices (Birnberg and Snodgrass 1998; Takatera and Yamamoto 1999; Chow et al. 2004; Merchant et al. 2000; Nishimura 2000; Ahrens 1996, 1997; Ahrens and Chapman 1996; Anderson and Lanen forthcoming; Granlund and Lukka 1998; Loning 1996). A closer look at the findings of these studies, however, reveals patterns of similarities. This paper focuses on how significant these similarities are and

Stronger Integration Between Management Accounting and Marketing

848 words - 3 pages The call for a stronger integration between management accounting and marketing is a relatively new phenomenon. In recent years, some Authors have started to face the topic of the interface of management accounting and marketing with reference both to the management accounting and to the marketing literature (Glaves et al. 2007, Wilson and Gilligan 2005, Roslender and Hart 2003, Roslender and Hart 2002). The implicit acknowledgment of the

Explain the Main difference between Act and Rule Utilitarianism (it can also be used to explain the main difference between Bentham and Mill)

2697 words - 11 pages Explain the main differences between Act and Rule UtilitarianismUtilitarianism is a theory, which first became widely acknowledge when it was adopted by its greatest advocate Jeremy Bentham. It is a theory that maintains that it is an action's total consequence that determines its moral correctness. It is a theory not concerned with the effects of the action on the individual carrying out the action, but instead the effect it has on everybody

How did Descartes Explain the Relationship between Mind and Body?

2612 words - 10 pages and complicated to Elizabeth’s mind, because she could not understand how interaction between mind and body could exist and how it is possible to influence each other (Fancher, & Rutherford, 2012). In May 1643, Descartes answer for the first time to Elizabeth’s letter and he tried to explain her, his observations and his theory with the following quotes: "there are two facts about the human mind on which depend all things that we can know of

Explain the difference between a major character and a minor character and illustrate your answer from Death of a Salesman

892 words - 4 pages Death of a Salesman examines how the life of Willy Loman spirals downwards towards suicide. Willy is clearly the main character as he has the most stage time, connects with the audience, and influences the other characters lives. When compared to Willy, Charley and Happy's roles are far smaller but not less important because they provide contrast. They advance the development of Willy's character and give the audience insight into Willy's

Managerial accounting and financial accounting

742 words - 3 pages organizations. Managerial and financial accountants are required to operate with highest ethical standards.Managerial Accounting is the process of identifying, measuring, analyzing, interpreting and communicating information in order to achieve an organization's goals (Thompson, 2006). Managerial Accounting is widely known as Cost Accounting all over the world. Management accounting is concentrated towards managers of organizations to assist them

Explain how mortgage backed securities are issued. Present evidence of the main issuers of these securities and explain the main reasons they issue these bonds

948 words - 4 pages Present evidence of the growth in the importance of non-government bond issues over the past five years (to2005). Explain how mortgage backed securities are issued. Present evidence of the main issuers of these securities and explain the main reasons they issue these bonds. Describe the main forms of bonds issued by (non-financial) companies (excluding hybrids) and on the basis of evidence of the amounts issued assess the size of this segment of

Similar Essays

The Differences Between Financial Accounting & Management Accounting

336 words - 2 pages Financial and management accounting are both important tools for a business, but serve different purposes. A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions. Management and financial accounting have different audiences, as investors are not usually involved in the day-to-day operations of the business but are concerned about their investment, whereas

Explain How An Understanding Of The Main Theories On Leadership Can Benefit Managers Of Organisations. Assess The Difference Between Leadership And Management Processes

980 words - 4 pages , subordinates and task into line. Sometimes he may need to change his own behaviour, but often there is much to be gained from redefining tasks or developing the group.Perhaps the real secret of a good leader lies in their ability to evaluate the task in hand and the people involved and then decide upon the approach to take.Assess the difference between leadership and management processes.Leadership and management are two notions that are often used

Explain How An Understanding Of The Main Theories On Leadership Can Benefit Managers Of Organisations. Assess The Difference Between Leadership And Management Processes

861 words - 3 pages redefining tasks or developing the group.Perhaps the real secret of a good leader lies in their ability to evaluate the prevailing situation and to choose the most appropriate approach.Assess the difference between leadership and management processes.Leadership and management are two notions that are often used interchangeably. However, they are two different concepts.Leadership is just one of the many assets a successful manager must possess. The

Financial And Managerial Accounting: What's The Difference?

2912 words - 12 pages Accounting, Chapter 1). The focus of managerial accounting is on the decisions made by the management of a business. Managerial accounting organizes accounting information to help plan and operate a business. There are two major differences between financial accounting and managerial accounting. First, managerial accounting is concerned primarily with decisions made