The Different Functions of Financial Accounting and Managerial Accounting

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Business requires the appropriation of funds and the analysis of how these funds are and should be used. The primary task of an accountant is to account for all transactions that were done over a period of time for a specific organization and to arrange these facts into financial statements that can be analyzed. The two main types of accounting, financial and managerial accounting are used to evaluate a businesses financial status through financial information that is specific to the audience. Although financial and managerial accounting use similar primary financial statements, the analysis of the documents and the information presented differs tremendously primarily because the financial accounting statements are directed to external users and the managerial accounting statements are directed to internal users. This difference varies the information presented on the financial statements and the analysis that can be surmised from reviewing the documents. Due to regulations that require financial information to be standardized, two primary forms of accounting have been developed to address concerns specific to an audience. Financial accounting is the most public accounting information and is available to external users, such as creditors, auditors, and analysts. This information is an aggregate overview of the company’s financial statement because they are used by external users and controlled by reporting standards established by the SEC and the Financial Accountings Standards Board (Walther, 2009). The information provided in the financial statements under the financial accounting system is used by auditors to analyze the businesses financial position. Maintaining an accounting standard for report for external users is al... ... middle of paper ... ...nancial information and how to analyze the information reported. While each type of accounting is necessary, they are aimed at different audiences and have various standards that are necessary to adequately evaluate the financial position of the company. Financial accounting is primarily the function of putting financial statements together in accordance to GAAP so that the information can be viewed and analyzed for external users, including auditors and shareholders. Managerial accounting is the process of compiling financial statements that will aid the management team in making decisions for the organization. The decision-making process requires information that is specific to the question at hand. The issue that is posed is will the information be evaluated adequately omitting information that the government feels is necessary to thoroughly evaluate a business.
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