How is the purpose for managerial accounting different than that of financial accounting? Both financial and managerial accounting frequently rely on the same essential financial data but financial accounting reports are prepared for persons outside ones organization like shareholders and creditors, whereas managerial accounting is for managers internal to one’s organization (Accounting For Management, 2014). In addition to the to the differences in whom they are prepared for, managerial and financial accounting also differ in their emphasis on the past and the future, the relevance of data as well as one is restricted by guidelines and the other is not (Accounting For Management, 2014).
Managers are always planning in order to make processes better as wells as making the company better as a whole. Managerial accounting enables managers to plan for the future as the daily weekly monthly reports allow mangers to fix what is wrong or continue down a path that will make the company better in the future. Financial accounting uses past data to understand and to make decisions as would a loan officer would to evaluate and make a decision on giving one a loan or not.
The relevance of the data is another difference of financial and managerial accounting. Financial accounting data is expected to be unbiased and certifiable. Managerial accounting needs data that is important to the problem at hand even if it’s not certifiable (Accounting For Management, 2014).
A big difference between financial accounting and managerial accounting is that financial accounting is restricted by the Generally Accepted Accounting Principles (GAAP) and managerial accounting is not. The type of reports for financial accounting such as financial statements which are produced for persons external to an organization must follow GAAP. Managerial accounting is not restricted by GAAP because its data is prepared for managers internal to the organization (Management Accounting Versus Financial Accounting, 2014).
Financial accounting and managerial accounting commonly rely on the same essential data but they differ on the emphasis place on the data, the relevance of the data and the guidelines one must abide by when making present, future and long term decisions.
Accounting For Management. (2014). Retrieved from Difference Between Financial and Managerial Accounting (Financial Accounting Vs Managerial Accounting): http://www.accountingdetails.com/financial_accounting_vs_managerial_accounting.htm
Management Accounting Versus Financial Accounting. (2014). Pearson Learning Solutions, New York, NY. Retrieved from http://www.pearsoncustom.com/mct-comprehensive/asset.php?isbn=1269879944&id=11613
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