Difference between Managerial and Financial Accounting
The overall objective in managerial accounting, which is often referred to as “cost accounting” is to provide useful information for internal decision makers to use. This is different from the overall objective of financial reporting as the general objective is to provide information for external users.
In addition, managerial accounting is used for projections and running the business on a daily basis. There are no official set of accounting standards for managerial accounting like there is for financial accounting (U.S. GAAP).
Below is a summary for each type of accounting:
Intended users: The intended users of managerial accounting financial statements is the internal management team of the company. Management would create these financial statements to help them run the business efficiently and effectively. There are no rules when it comes to managerial accounting! Its the wild wild west!
Standards: None! There are no standards that must be followed when creating financial statements using managerial accounting.
Focus: When it comes to the focus or the purpose of managerial accounting, its to create financial information that cane be used for forecasting, budgeting, or planning.
Frequency: Managerial accounting financial statements are prepared on an as-needed basis. Some management teams prefer to have the financial information prepared weekly while others may only do it on a quarterly basis. It’s completely up to the management team of the company!
Intended users: The intended users in financial accounting financial statements are investors, creditors, etc. Financial accounting statements would not typically be used for internal decision making.
Standards: For companies located in the United States, U.S. GAAP must be followed. Outside of the United States, companies would follow IFRS or a similar set of reporting standards.
Focus: The focus is on the historical results and summarizing the results over a specific period of time.
Frequency: In financial accounting, financial statements are typically prepared on a monthly basis, with results communicated to the general public on a quarterly and annual basis.
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