The differences between managerial accounting and financial accounting can be distinguished through 5 aspects: a) Primary Users of Reports
In managerial accounting, the information will be use within the organization, by the employees and managers, where else in financial accounting, the information in the reports will be used by external parties such as banks, creditors and shareholders.
b) Types and frequency of the reports.
In managerial accounting, the information is reported continuously. And all the internal reports will be produced as frequent as needed. Example of internal reports are budgets. On the other hand, information in financial accounting will be reported periodically, as the information is produced based on monthly, quarterly and yearly basis. Examples of financial statements are balance sheets, income and cash flow statements. c) Purpose of the reports.
In managerial accounting, every information will be have a specific purpose which will be used by internal parties to analyze the past, present and future in order to make important decisions for the company. Reports produced under financial accounting is only for general purposes.
d) Content of reports
The content of the information in financial accounting is highly aggregated as it focuses the organization as a whole. Double-entry accounting and cost data is produced under financial accounting. Under managerial accounting, all information are very detailed and focuses more on subunits of the business. In order to get any relevance data, some information can only be obtained beyond using double-entry. The standard is depending on the decisions according to the relevance of the information required.
e) Verification process
There is no need for independent audits in managerial accounting for all the information reported as it is used only internal employees. But in financial accounting, all reported information must be audited by CPA as it involves...
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