Difference between Managerial Accounting and Financial Accounting
The reports and financial statements made as per the concepts of financial accounting are primarily used by exterior parties like stakeholders, suppliers, governments, investors etc. On the other hand the reports and cost related information made as per the concepts of managerial accounting are primarily used by management of the organization for the purpose of making plans, decisions and implementing control measures. However, both concepts utilize the same sort of financial information and data (Accounting for Management, 2012).
Managerial accounting reports and statements are more future oriented as it involves planning and on the other hand, financial accounting information is past oriented as it's focus is on providing brief overview of past financial performance of the business. The data utilized in financial accounting is predicted to be independent and provable because managers require this information to be relevant enough for estimating future plans and controls.
Accuracy is considered expensive as it consumes time and resources, and less significant while making managerial accounting decisions and reports but this factor is significant for preparing financial accounting reports and statements. The managerial accounting emphasizes on non numeric or monetary data such as products customers are interested in, employee satisfaction level etc. as compare financial accounting in order to make necessary decisions.
Financial accounting represents the performance of organization on entire level where as, managerial accounting represents certain units or segments of an organization such as sales repot, audit report etc. Financial statements are prepared as per the GAAP in order to minimize the chances of fraud and misrepresentation, where as, managerial reports may not require to follow principles of GAAP (Accounting for Management, 2012).
Uses of Financial Information for management purposes
Financial information is an adequate source of making crucial financial decisions for a business. It reflects the financial condition of the business. The financial information can be used by internal users such as employees, owners and managers for sake of smoothly carrying out the business activities of the company. The financial reports is needed by the managers and owners of the companies to make necessary decisions such as investing in new project, developing new product or initiating a new department. These managers conduct financial analysis of the provided information in order to explore the weakness and strengths of the business operations and financial health of the company. The financial statements including balance sheet, income statement, and cash flow statement can be used by managers and board to determine the liquidity of company, efficiency in handling of assets, debt structure, and profitability of the company. These financial statements are also utilized by employees for preparing accumulative bargain agreement such as issues of promotion, rankings, and salary increments (Finance Maps of the world, n.d.).
Profession and Role of managerial accounting in today's business environment
The field of managerial accounting is unique as compare to public accountancy. It is considered as a acute profession that hugely affects the performance of a ...