Financial Vs Managerial Accounting

1156 Words 5 Pages
The purpose of accounting is to identify, record and provide financial information concerning a business. An effective accounting system is one of the most crucial aspects of having a successful business. No matter what type of business it is or how large or small it may be, accounting will play an important role in its overall success. Even though accounting systems can be traced back for thousands of years and have developed in many different ways over time, todays businesses primarily use two types of accounting systems: financial and managerial. Both systems of accounting serve different purposes but they are equally as important and essential to the overall financial wellness and proper functioning of the business. The first records …show more content…
According to Weygandt, “Analysis involves use of ratios, percentages, graphs, and charts to highlight significant financial trends and relationships. Interpretation involves explaining the uses, meaning, and limitations of reported data” (2013). The accurate and timely analysis and interpretation of the financial records is what will allow stakeholders and managers to see and understand the overall financial picture for the company and then be able to decide what actions need to be …show more content…
Even though I only run a small business, with no outside investors, managerial accounting is still crucial to operating the business. By looking at financial records on a regular basis I am able to allocate and adhere to a budget, track cash flow, and financially prepare for busy and slow seasons. With accounting I can determine where costs can be cut and where additional spending can or should take place. I am also able to evaluate the overall growth of the company and when the time comes I will know when we are ready for outside investors. Financial and managerial accounting, despite their vast differences have one crucial element in common: the overall financial wellbeing of the company. Financial and managerial accounting each serve very different purposes for a company but each are equally as important. They both aid in making sound and informed financial decisions that will better the company in some

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