Managerial and Financial Accounting

Essay by JkhatriUniversity, Bachelor'sA, June 2009

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Managerial accounting deals with providing information to managers or in-house to individuals who are interested in the financial dealings of the organization. A managerial accounting system is designed to measure the efficiency of internal processes, whereas; financial accounting is concerned with providing information to individuals outside of the company such as stockholders', creditors, and banks. Both are very important to the success of the company and will be explored further in this study.

Managerial AccountingManagerial accounting provides information on the cost of an organization's products and services. Furthermore, managerial accounting provides performance reports, which are used to compare budgets with actual results. The information that is attained from managerial accounting that assists managers in their planning and control activities is sales forecasting, budget analysis, comparative analysis, feasibility studies, mergers, and consolidation reports. "Reports are considered to be "future looking" and have forecasting value to those within the company" (Differences, 2009, ¶1).

Furthermore, information attained from managerial accounting can also be used in sales backlogs, unit quantities, and demands on capacity resources.

Managerial accounting does not need to comply with Securities and Exchange Commission or Financial Accounting Standards Board (FASB) regulations, because the information is shared in-house or within the walls of the organization. None of the information acquired from managerial accounting is used for reporting to banks, shareholders', or the stock market. "At a minimum, financial accounting information must be reported annually. On the contrary, management accounting information is reported continually. Internal users need to evaluate past, present, and potential future information in order to make decisions" (Bushman, 2007, p.2).

Financial AccountingThe primary focus of financial accounting, as stated previously in this paper, is to provide accounting information related to an organization for a specific period of time to external interests. Financial accounting is a reporting mechanism that is in...