Managerial accounting to financial accounting

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Timeliness and Accuracy

• Managerial Accounting: Managerial accounting information is typically more timely than financial accounting information. This is because managerial accounting information is used by internal managers to make day-to-day decisions, and managers need to have access to the most up-to-date information possible.
• Financial Accounting: Financial accounting information is typically more accurate than managerial accounting information. This is because financial accounting information is subject to external audit, and auditors must ensure that the information is accurate and reliable.

Types of Data

• Managerial Accounting: Managerial accounting reports can contain a wide variety of data, including financial data, non-financial data, and historical data. Financial data can include information such as sales, costs, and profits. Non-financial data can include information such as customer satisfaction, employee productivity, and product quality. Historical data can be used to track trends and performance over time.
• Financial Accounting: Financial accounting reports typically contain only financial data. This data is used to create financial statements, such as the income statement, balance sheet, and cash flow statement. Financial statements provide a snapshot of a company's financial performance at a specific point in time.

Relevance

• Managerial Accounting: Managerial accounting information is typically more relevant to internal managers than financial accounting information. This is because managerial accounting information is tailored to the specific needs of the business and its managers.
• Financial Accounting: Financial accounting information is typically more relevant to external stakeholders than managerial accounting information. This is because financial accounting information provides a standardized overview of a company's financial performance.

How to Use Managerial Accounting in Your Career

Managerial accounting information can be used in a variety of ways to improve the performance of a business. For example, managers can use managerial accounting information to:

• Make informed decisions about pricing, production, and marketing.
• Identify and eliminate costs.
• Improve efficiency and productivity.
• Set and track goals.
• Evaluate performance.

Flow of Costs Through the Manufacturing Process

The three costs of a finished product—raw materials, direct labor, and factory overhead—flow through the manufacturing process as follows:

1. Raw materials: Raw materials are the basic materials that are used to produce a finished product. For example, the raw materials for a car might include steel, rubber, and glass. Raw materials are typically purchased from suppliers and stored in a warehouse. When a product is ready to be produced, the raw materials are withdrawn from the warehouse and sent to the production line.
2. Direct labor: Direct labor is the labor that is directly involved in the production of a finished product. For example, the direct labor for a car might include the assembly line workers who build the car. Direct labor is typically paid on an hourly basis.
3. Factory overhead: Factory overhead is all of the other costs associated with manufacturing, such as rent, utilities, and depreciation. Factory overhead costs are typically allocated to products based on direct labor hours or machine hours.

Product Costs vs. Period Expenses

Product costs are the costs that are directly associated with the production of a finished product. These costs are inventoried and carried over to future periods until the product is sold. Period expenses are the costs that are incurred in the current period and are not directly associated with the production of a finished product. These costs are expensed in the current period and do not carry over to future periods.

Examples of product costs include:

• Direct labor
• Direct materials
• Factory overhead

Examples of period expenses include:

• Selling and administrative expenses
• Research and development expenses
• Interest expense

Conclusion

Managerial accounting and financial accounting are two important branches of accounting. Managerial accounting is focused on providing information to internal managers to help them make better decisions. Financial accounting is focused on providing information to external stakeholders to help them assess the financial performance of a business.

Both managerial accounting and financial accounting are important for the success of any business. By understanding the differences between these two branches of accounting, businesses can use the information they provide to improve their performance and achieve their goals.

Sample Answer

Managerial Accounting vs. Financial Accounting

End Users

• Managerial Accounting: The primary end users of managerial accounting information are internal managers, such as CEOs, CFOs, and department heads.
• Financial Accounting: The primary end users of financial accounting information are external stakeholders, such as investors, creditors, and government agencies.