Similarities Between Financial And Managerial Accounting

Improved Essays
Financial and managerial accounting are both important accounting aspects to effectively manage a company. Financial accounting are reports that are mainly used by external stakeholders of a company. Managerial accounting is mainly used by management of a business to help them make informed decisions. While both forms of accounting provide different information for different uses, they both provide important financial information that describes the financial wellness of an organization.
Both Financial and managerial accounting provide accounting data that allow individuals to make informed decisions about a company. They allow both inside and outside stakeholders to decide what is the right thing for them to do, whether it is to invest money,
…show more content…
According to Hermanson, managerial accounting allows managers to make informed decisions on where to direct the company to further increase profits (Hermanson, 2011). While managers do look at reports from financial accounting, it does not provide them the necessary data to be able to make decisions that will help the company financially. Because of the internal use of managerial accounting, it is not under government control. If a company wants to falsify managerial accounting reports, they will ultimately only be hurting themselves instead of outside persons. By providing detailed financial data, managerial accounting reports allow management to see what divisions of the company is making money, and what divisions of the company is struggling. By seeing this information, management is then able to make decisions on how to help the struggling division, or cut it from the company all …show more content…
The company was then given to a group of heirs. This group was unsure if they should keep these businesses, and if they kept any of them, which one they should keep. Initially they only had finial accounting documents to help them make their decision. The financial accounting reports told them how much they were spending on the hotel, and how much income they were making from the hotel, the office building, and the apartment. It did not tell them how well the office and the apartment were doing. One of the owners decided to produce a managerial accounting report for all of their assets. Once it was complete, the heirs were able to see that they were making significant more money from the hotel than they were the office building and the apartment building. These reports help them make the final decision that they should sell the office building and the apartment, but keep the hotel. By selling the office and the apartment, the group of heirs would be able to invest that money, and increase their profits by a larger percentage than if they were to keep the office or apartment.
Managerial and financial accounting both serve a great purpose, but for two different groups of people. Outside stakeholders use financial accounting reports to increase their profits, while managers use managerial accounting to increase

Related Documents

  • Improved Essays

    Final Project Part 1 Tina McGee Due 9/25/2017 I. Analyze Roles and Responsibility for Compliance A. A finance manager is tasked to manage the funds of a company to the best benefit of the company while following compliance guidelines. To do this some of the decisions a finance manager would make would pertain to the capital structure of a company, input on investment and dividends, cash management and very importantly evaluating the financial performance of the company. B. As a financial manger each of the above decisions will need to be made in the most ethical and legal manner possible.…

    • 860 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    The third aspect that should be appreciated is how the hospital 's revenues and expenses are grouped for planning and control purposes. The following discussion will look deeper into each aspect and highlight areas for the CFO and management staff consider. The Differences between Audited and Unaudited Reports The first aspect the CFO and management staff should comprehend is the difference between audited and unaudited reports.…

    • 703 Words
    • 3 Pages
    Improved Essays
  • Decent Essays

    LaShundra, I agree with you when you look at a company’s balance sheets and income statements it can give either internal or external users a picture of how the company currently is doing during a certain period of time. With this information either party internal or external can make decisions that can affect the company as a whole by either investing in its future or expanding the latest production line.…

    • 70 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    The ACCT 6120 course helps us learn how the company is governed. The lecture and tutorial introduce and recap a series of accounting, corporate law and auditing theories and practice with a specific case in each class to analyze how the theories apply, which could better help us understand the theories as well as thinking more critically. Before studying this subject, we all think as an accountant, the corporate governance is a little bit far away from us. However, through the content of each week, from the principle conflict to sub-committees and finally CSR, the core of the issue is the accounting information. The accounting information is the incentive to drive the management of company to take some actions, for example, earning management…

    • 939 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    The differences between for-profit accounting and not-for-profit or government accounting are vast due to the different goals of different entities. Businesses’ main concern is net worth and growth, while non-profit and government’s main concern is budget and accountability. The different requirements and focuses come from these different…

    • 919 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Sarbanes-Oxley Act

    • 833 Words
    • 4 Pages

    In short, managerial accounting stresses attention to the accurate and complete collecting of cost information by product or service and by responsibility center in order to project future actions, determine prices, control costs and assess performance (Brown, Sprohge, 1987, p. 42). In managerial accounting to stay focus on the computation and reading. Many people just look for the formula and the number and try to figure out the answer in that order, but it’s not just that simple. According to Cristian, The managerial account information should be relevant, accurate, timely and cost effective Managerial accounting should adopt itself to the changing circumstances (2014,…

    • 833 Words
    • 4 Pages
    Improved Essays
  • Decent Essays

    Costco Financial Analysis

    • 191 Words
    • 1 Pages

    Financial accounting refers to information that investors or creditors would utilize on an external basis. For example, a company’s supplier may require financial records to ascertain if they are worthy to receive credit. Managerial accounting assumes the role of an internal function that pertains to outlining, administering, and supervising the daily activities of a company (Edmonds, Olds, Tsay, & McGraw-Hill/Irwin, 2008). As the manager of an individual Costco store, there would be several, various types of information that I would deem essential for the efficiency of my store. A weekly associate schedule, along with overtime capabilities for each day, would be necessary.…

    • 191 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    Case Study One Costco

    • 271 Words
    • 2 Pages

    A manager needs more information about their store than someone that is investing because “internal uses need information to plan, direct, and control business operations” (Ferrell, Gatewood, and Taylor, 2010). One store is not an example of an entire business’ health, yet it can be a microcosm of problems that the bigger organization has. The manager needs behavioral/financial information to help a particular one store. Each store could have different costs associate with it; such as rent being more or less, overhead due to being a slower or busier location, one Costco might offer something different than another based on customer demands, and theft rates could be higher depending on the location. All of this is information a manager needs, not investors because one location does not tell the whole story of the organization.…

    • 271 Words
    • 2 Pages
    Improved Essays
  • Improved Essays

    Financial accounting is recorded for outside decision makers, to make a determination of the success of the organization. It is important for financial accounting to be accurate and stay within the GAAP guidelines. The more profitable an organization appears on the financial accounting report, the more likely outside investors will take interest in the company. Managerial accounting is used for the supervisors and other decision makers of an organization to better evaluate the business progress. Organizations can benefit tremendously from using managerial accounting.…

    • 822 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Introduction 1. Zara’s financial statement analysis The financial statement is recognized as an efficient method of communicating the company’s financial status and statistics to its shareholders (CILT, 2014a, p. 17). In addition, it aims is to provide a detailed description of where the company stands from a financial perspective along with its performance in a specified period. Hence, an organization can plan and set their future economic decisions based on their performance reflected in the financial statements (CILT, 2014b, p. 18).…

    • 775 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    With this accounting equation, it is presented to give you an idea of a double entry accounting. And when a company borrows from the bank, a company 's cash account can increase and its liability account loans payable will increase. If the company pays for advertisement their cash flow will decrease but the account advertisements expenses can increase. Connections between an income statement and Balance sheet Each of the financial statements is on separate sheets for the annual financial report, here is a quick explanation how they working from the top to the bottom.…

    • 1042 Words
    • 5 Pages
    Improved Essays
  • Superior Essays

    Upon the completion of this course I have come across topics that have interested me and increased my knowledge especially in the financial and accounting aspect. This course has introduced me to understanding the relationship between financial and accounting in making an effective strategic decision. In as much they sound alike they are different and used in different purposes, both accounts are important to the business but are used for different purposes. Financial statements are requirement for any organisation and are published at the end of a financial period for its stakeholder, shareholder and customers to see, they show reports of performance on a historic basis and what has been achieved over the years. At the time the statement is…

    • 1536 Words
    • 7 Pages
    Superior Essays
  • Superior Essays

    Part One: Why I Want to Be a Financial Manager I want to be a financial manager when I am older. It is a job that interests me and seems like something that will be enjoyable because of my high interest in it. I have been good with numbers and math my whole life, so I feel that this job would suit me perfectly. There is just something about business that makes me want to go into it when I am older.…

    • 1465 Words
    • 6 Pages
    Superior Essays
  • Improved Essays

    Cost Accounting Essay

    • 1292 Words
    • 6 Pages

    The use of accounting in the business field to measure an entity in many aspects regarding financial information is crucial in modern day. Tracking how a business obtain, spends, and invest their financial assets are key indicators for not only external users such as investors and creditors, but internal users such as management departments. To plan for future endeavors, one must understand their present capabilities. Through extensive research, we can establish why cost accounting is important to the success of the firm, various methods of cost accounting, and how they are used.…

    • 1292 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    More and more organizations utilize a management control system (MCS). A MCS can assist an organization with evaluating the organization, as well as implementing corporate strategies that will enable the organization to roll out corporate-wide systems. Typically a MCS covers the administrative and financial areas of an organization.…

    • 1406 Words
    • 6 Pages
    Improved Essays