Financial & Managerial Accounting Report

Topics: Ethics, Management accounting, Decision making Pages: 10 (1240 words) Published: May 23, 2005

What's ethics got to do with accounting? Everything! Believe me, everything. When

the word ethics is mentioned, what readily comes to mind is the question of deciding

between doing what is right and doing what is wrong. But doing what is right versus

doing what is wrong within what context? The idealist will say that decisions of ethics

should not be conditional. But it is not as simple as it sounds, for what constitutes "right"

to one person, may be "wrong" to another person. What bridges the gap, guides, and

clearly distinguishes the line between right and wrong in political, economic and social

systems are traditions, culture, laws and regulations. Even then, what is unethical may not

necessarily be illegal, even though there exists a close relationship between the two.

These dynamics apply to almost every legal profession, accounting not exempted. This

paper examines the issues of ethics in accounting. It also looks at the differences and

similarities between financial accounting to managerial accounting.


According to Marshall et al, (What the numbers mean, 2003) accounting involves

"identifying, measuring, and communicating economic information about an organization

for the purpose of making decisions and informed judgments." This definition clearly

shows that there are stakeholders in the information generated by accountants. These

include managers, shareholders, oversight and law enforcement agencies, and the general

public. Since these entities rely on the reports generated by accountants for critical

decision making, it is important that the information be reliable, objective, and presented

in an easy to understand format. Ignoring or circumventing these values renders the

information generated unreliable. It can lead to devastating consequences as evidenced

by events which led to recent legislation such as the Sarbanes-Oxley Act which seeks to

make top management of organizations accountable for the financial statement produced

by their organizations through the internal controls they develop and enhance, and to

oversee auditors who hitherto could have business interests other than auditing in the

organizations they were responsible for auditing.

Financial versus Managerial accounting

Managerial accounting refers to the management of company resources while

applying management accounting principles in decision making. One important

characteristic of management accounting is that, it is internal to the organization even

though external information such as financial accounting reports will have some amount

of influence.

Financial accounting refers to the identification, recording, computation, and reporting

of financial information to users who may have a stake in the information reported. An

important characteristic of this information is that it is geared towards users external to

the company.

A financial accountant generates information for external consumption. These

products include the income statement, the balance sheet, the statement of cash flow, and

the statement of owner's equity. These statements are used to help stakeholders make

critical decisions related to the business. A management accountant on the other hand,

generates reports such as the schedule of cost of goods sold, and may use reports

generated by the financial accountant. The schedule of cost of goods sold is used to

evaluate and record internal costs associated with the production process using various

methods. This is important for employees to understand how their actions impact the

overall production costs. The income statement can be instrumental in helping employees

understand the direction the business is headed in terms of

Ethical values

The public and oversight organizations have...

References: March, 2005. Retrieved on 21st May, 2005 from University of
Phoenix online
Viele. Retrieved on 21st May, 2005 from
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