Financial vs. Managerial Accounting

opinion Essay
1091 words
1091 words

Financial and Managerial accounting are used for making sound financial decisions about an organization. They provide information of past quantitative financial activities and are useful in making future economic decisions. (Albrecht, Stice, Stice, & Skousen, 2002) The same financial data is used to derive reports for each accounting process yet they differ in some ways. Financial accounting primarily provides external reports for external users such as stock holders, creditors, regulating authority and others. (Garrison, Noreen, & Brewer, 2010) On the other hand Managerial accounting is concern with providing information that deals with the internal viability of the organization and is tailored to meet the needs of an individual organization. (Albrecht, Stice, Stice, & Skousen, 2002) Managerial Accounting addresses those aspects that relates to an individual organization return on investments (ROI). (Albrecht, Stice, Stice, & Skousen, 2002) A company’s profitability depends on periodic attention to its assets turnover and profit margin. This process is designed to support the decision making that adds value to an organization. Organizations are sometimes broad and divisional. Planning, controlling, and evaluating is key in the effective decision making process. (Albrecht, Stice, Stice, & Skousen, 2002) An organization must make decisions about its future products, services, operations, and investments. It must begin a tracking process for cost, quality, and performance. Finally it must analyze the results, and variances, providing feedback to assess areas of personnel, divisions, products, and processes. (Albrecht, Stice, Stice, & Skousen, 2002) Managerial accounting is unique to the individual organization. This internal a... ... middle of paper ... ... and managerial accounting is the types of reports prepared. Internal reports are tailored to meet the need of management and may vary from business to business. External reports however, follow certain standards and guidelines and are thus more uniformed among companies. (Albrecht, Stice, Stice, & Skousen, 2002) No government regulator or auditor is going to insist that a company implement a good management accounting system. (Garrison, Noreen, & Brewer, 2010) The choice of how to collect and utilize information in a company is strictly management’s decision and is a part of the company’s competitive strategy. Works Cited Albrecht, W. S., Stice, J. D., Stice, E. K., & Skousen, k. F. (2002). Accounting Concepts and Applications. Cincinnati: South-Western. Garrison, R. H., Noreen, E. W., & Brewer, P. c. (2010). Managerial Accounting. New York: McGraw Hill/Irwin.

In this essay, the author

  • Explains that financial and managerial accounting are used for making sound financial decisions about an organization. they provide information of past quantitative financial activities and are useful in making future economic decisions.
  • Explains that managerial accounting addresses the aspects that relate to an individual organization return on investments (roi).
  • Explains that managerial accounting is unique to an organization and is used strategically in accomplishing the organization's mission and goals.
  • Explains that managerial accounting helps managers deal with future economic decisions. the ever-evolving changes such as competition, customer needs and desires, and ecomonic conditions demands a manager's attention and rational decision.
  • Opines that managerial accounting is discretional by the individual organization and does not need to follow the generally accepted accounting principles.
  • Compares financial accounting with managerial accounting, which summarizes past financial transactions and activities. these reports are required by regulating bodies such as the sec and irs.
  • Explains that the sec regulates issuance and trading of securities in the united states and monitors insiders trading and stockbrokers' behavior.
  • Explains the importance of ethics and integrity in accounting. wall street's expectations about a company and not its actual performance sometimes lead to inflation of numbers.
  • Explains that the governing body (fasb) is acknowledged as the source of authoritative accounting standard by the private sector in the united states. globalization has required companies doing business around the world to institute another set of standard.
  • Explains the differences between financial and managerial accounting. internal reports are tailored to meet the need of management, while external reports follow certain standards and guidelines.
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