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Importance Of Financial And Managerial Accounting

848 Words4 Pages

Financial and Managerial Accounting
Derek Baker
ACCT105

Financial accounting is the field of accounting that is concerned with summarizing, analysing, and reporting of any business’ financial transactions (Chiang et al.. 2015). This includes financial statements preparation for the purposes of public consumption. Some of the people that are interested in receiving financial statements of a particular business include: suppliers, stakeholders, banks, government agencies, employees, and business owners.
Financial accounting is always governed by both international and local standards, and the standard financial accounting framework that is used in any given jurisdiction is known as GAAP (Generally Accepted Accounting Principles). This …show more content…

Another objective which is equally important in financial accounting, is capital maintenance.
Managerial accounting on the other hand, I the process that involves the identification, measuring, analysis, interpretation, and communication of information with an aim of pursuing organizational goals (Garrison et al. 2010). Managerial accounting can also be referred to as cost accounting. The information that is generated in managerial accounting is mainly intended for the managers, so as to help them in decision making within the organization.
Managerial accounting covers all the accounting fields in business, which have an aim of providing information on the management of the business’ operation metrics. The information that is mainly used by managerial accountants relate to product costs or the costs of services that are purchased by the company. Budgets are also used extensively since they are considered to be the quantitative expression of the plan of operation for a given business. The performance reports are always utilized by individuals in managerial accounting as this helps them to determine the deviations from the actual …show more content…

This is the cash flow that is generated from the sale of a product, store, customer, or region. Margin analysis comprises the incremental benefit resulting from increase in production and moves into breakeven analysis which involves the calculation of contribution margin on the sales mix, so as to find out the unit volume equated to the total expenditures by the business’ gross sales.
Moreover, managerial accounting manages constrains that exist within a line of production or the process of sales. The accountants in managerial accounting therefore have the task of determining where there is an occurrence of principle constrains and in turn calculate the impact that is caused by such constrains on cash flow, revenue, and profit.
The main difference between financial accounting and managerial accounting is that managerial accounting information is meant to help managers within the organization in decision making, whereas financial accounting is meant to provide information to people or parties that are outside the organization.
Financial accounting and managerial accounting appear to be similar in the following

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