ACCT/300: Principles of Accounting
April 9, 2008
Managerial and Financial Accounting
This paper will attempt to differentiate between managerial and financial accounting, the users of managerial and financial accounting and what type of business decisions would be made with the information. Managerial Accounting
Managerial accounting provides accounting information to managers who are inside an organization and who directs and controls its operations, to help them make decisions to manage the business. For example, it provides information on the costs of an organization’s products and services, which managers can use products cost to guide the setting of selling prices, and use services cost to make inventory valuation and income determination. It provides information on the budgets and performance reports. These reports often consist of comparisons of budgets with actual results. It also provides information on revenues of an organization’s products and services, sales back logs, unit quantities and demands on capacity resources, which assist managers in their planning and control activities (Managerial Accounting, 2008).
Financial accounting is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company. The primary objectives of financial accounting are to provide information that is useful in making investment and credit decisions; in assessing the amount, timing, and uncertainty of future cash flows; and in learning about the enterprise's economic resources, claims to resources, and changes in claims to resources. Some of the most important information that financial accounting provides are: it is a means to an end, it is historical in nature, it results from inexact and approximate measures of business activity, and it is based on a general-purpose assumption (McGraw Hill online learning center).