Introduction to Managerial Accounting



Introduction to Managerial Accounting

Managerial Accounting versus Financial Accounting

Managerial and financial accounting differs from each other in various aspects. Some of the major differences are highlighted below:

Types and Users of Information

Managerial accounting deals with providing the company's information within the business i.e. to executives, managers, and employees. On the other hand, financial accounting deals with delivering information to outside stakeholders i.e. investors or shareholders (http://accounting4management.com; Averkamp, 2012). Where, users of managerial accounting need information that can help them in planning, directing, and controlling the operations of business and the nature of information needed by these insiders depends on their job level (McGraw-Hill Higher Education, 2008). On the other hand, the users of financial accounting (investors or shareholders) are interested economic information of the company (financial data) and use it for evaluating company's position in their decision making.

Level of Aggregation

Managerial accounting data is less aggregated than financial accounting data. This is because of the nature of information its users want, that is, external users normally wants global information that can represent the organization's performance as a whole (such as comparison with other company), however, internal users need focused but comprehensive information regarding the specific subunits of their organization (McGraw-Hill Higher Education, 2008).

Regulation

Managerial accounting consists of no regulation, as it caters to inside human resource of a business, and thus is only limited by value-added principles. In contrast, financial accounting holds higher regulations by SEC, FASB, and several other determinants that are typified by consistency, accuracy, reliability, and objectivity (McGraw-Hill Higher Education, 2008).

Characteristics of Information

Managerial accounting is characterized by timeliness and relevancy, whereas financial accounting is more concerned with reliability, consistency, objectivity, and historical nature. Financial reporting incorporates fewer facts and less estimates than managerial accounting. Moreover, managerial accounting illustrates the future expectations; where, financial accounting illustrates the ...