Financial and Managerial Accounting

Financial and Managerial Accounting

To make a sound economic decision based on a firm 's performance , you must first understand and know the different accounting methods and principles that can help a business thrive and succeed . Most businesses have three main objectives : to earn a profit , remain solvent and have longevity . By using different accounting concepts , a business is apt to make a better decision to help the organization stay on top of financial matters . There are two groups interested in the financial status of a company . One group is the external

parties such as , stockholders investors , creditors , regulatory agencies , etc . Another group is the internal parties , like the department heads , officers , board members supervisors and so on

Financial accounting is for external agencies only . It is classified financial information issued on a quarterly and annually basis , to those who hold a share or interest in an institution . A record of the company 's transactions is kept to be analyzed and evaluated , so that the data can be transformed into various financial reports . Some of the financial reports prepared for external parties , consist of a balance sheet , a financial statement of income , an estimated value of tangible /intangible assets , a cash flow analysis and equity /liability reports . Also , pension and tax allocation must be reported to any regulatory agencies . A financial accountant protects the interest of the financial supporters within an organization

Managerial accounting is for the organization 's internal use . The internal reports are used to monitor different department 's cash flow and individual success . Managers of accounts look for ways to cut costs and increase productivity . Managerial accounting reports are issued as often as needed for an internal user , to help determine and influence the decision making process . The contents of these reports pertain to subunits of an organization and can be concise or very detailed . Some of the different reports rendered are profit /loss forms , revenue /expense sheets , individual department budgets , asset /equity comparatives and performance reports . A managerial accountant helps deviate any potential problems and keep an organization 's objective on track

Both types of accounting have similarities , as well as , differences They both may use the double-entry accounting system , but a managerial accountant is not limited to that way of reporting . Bookkeeping methods are used by both systems to record company data that is then evaluated to determine if a business is lucrative . They both have an overall objective for a company 's success . Financial accounting is restricted by GAAP guidelines , and managerial accounting does not have any formal guidelines set . One key difference between the two accounting methods is that one is aimed at providing information inside the realm of an organization , and the other directs the attention to parties involved outside of the organization . Financial accounting is primarily used for historical purposes . Managerial accounting is aimed at the present and future of a company

The advanced world of technology has vastly changed the accounting methods used today . Before the computer era , managerial accounting...