MelissaReed Unit 1 Seminar
Unit 1 Seminar- Financial Accounting vs. Managerial Accounting
Bachelors Capstone in Accounting
Melissa Reed
ACC499-01
Professor Cheryl Peoples
Financial accounting and managerial accounting are both very important tools used within businesses, but they serve very different purposes. “A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions. Management and financial accounting have different audiences, as investors are not usually involved in the day-to-day operations of the business but are concerned about their investment, whereas managers need information quickly to make daily business decisions” (smallbusiness.chron.com, 2014). Financial accounting focuses on the preparation of financial reports to be distributed to external parties such as shareholders, creditors, financial analysts, and others outside of the company. It provides summaries of past financial transactions for a specific period of time so those interested can see the financial performance of the company during that particular period. The past summaries of financial transaction could possibly be used for planning, but only to a point. Financial accounting reports must be filed annually. Publically traded companies must make their financial reports public records. In contrast, managerial accounting reports are prepared for managers within an organization to make day-to-day business decisions. Managerial accounting focuses on current and future trends. “The future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions, and so on. All of these changes demand that the manager 's planning be based in large part on estimates of what will happen rather than on summaries of what has already happened” (accountingformanagement.com, 2014). Managerial accounting relies heavily on the forecast of markets and trends to make operation decisions
Bachelors Capstone in Accounting
Melissa Reed
ACC499-01
Professor Cheryl Peoples
Financial accounting and managerial accounting are both very important tools used within businesses, but they serve very different purposes. “A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions. Management and financial accounting have different audiences, as investors are not usually involved in the day-to-day operations of the business but are concerned about their investment, whereas managers need information quickly to make daily business decisions” (smallbusiness.chron.com, 2014). Financial accounting focuses on the preparation of financial reports to be distributed to external parties such as shareholders, creditors, financial analysts, and others outside of the company. It provides summaries of past financial transactions for a specific period of time so those interested can see the financial performance of the company during that particular period. The past summaries of financial transaction could possibly be used for planning, but only to a point. Financial accounting reports must be filed annually. Publically traded companies must make their financial reports public records. In contrast, managerial accounting reports are prepared for managers within an organization to make day-to-day business decisions. Managerial accounting focuses on current and future trends. “The future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions, and so on. All of these changes demand that the manager 's planning be based in large part on estimates of what will happen rather than on summaries of what has already happened” (accountingformanagement.com, 2014). Managerial accounting relies heavily on the forecast of markets and trends to make operation decisions
References: Accounting For Management (2014). “ Difference Between Financial and Managerial Accounting”. http://accounting4management.com/financial_accounting_vs_managerial_accounting.htm. Small Business (2014). “The Difference Between Financial Accounting and Management Accounting”. http://smallbusiness.chron.com/differences-between-financial-accounting-management-accounting-3985.html.