Managerial Accounting and Financial Accounting

financial accounting

The first topic that I would like to speak about is the difference between managerial and financial accounting through GAAP (Usually Accepted Accounting Principles). A firm must follow GAAP down to the tee, however with managerial accounting there's methods around it, because managerial accounting doesn't must worry about following GAAP standards. of the main points in managerial accounting is cost accounting, and the point of cost accounting is to help decision-making, budgeting, and also cost analysis. In order to effectively cost a product there's plenty of different formulas that must be followed which need not follow GAAP standards, however when the information is then transferred to the financial side of the firm, then all the GAAP principles must be followed. The number aim of financial accounting is to have correct financial statements so that the public, or the shareholders can continue or walk away from their investments. Also, in order to meet the SEC requirements a firm must follow all of GAAP principles.
financial accounting

Not only does managerial and financial accounting follow different principles, but they also have different ways of reporting their information. Managerial accounting focuses more on reporting the information to an organization in the company that will help with planning and organizing for the future. Also, each month's information is saved, and then they will use that information to foretell what will happen in the future, so all of the information collected is useful. However, financial accounting reports information to a different group of people. The information is gathered for the month or the quarter, and then sent to the CEO, or the CFO. The next step would be for the CEO or CFO to document the information to share holders or any that makes investments in the company. Although there's major differences between the each are equally as important.
financial accounting

Next, there is a major difference in the general focus of the different types of accounting. The managerial side of the firm will focus on projections for the future, because all of the information that is collected throughout the months and years will be useful in predicting what will happen in the future. However, financial accounting's only focus is to make sure that the financial statements are correct at the finish of the period. Also, financial accounting is necessary to make sure the ledger and the journal accounts are correct and up to date.

Not only is there a difference in the general focus of managerial and financial accounting, but the way in which each side expresses dollars in units. Managerial accounting focuses on unit costs, which are associated with Direct Material, Direct Labor, and Overhead. These are the parts, which make up costing a product. In order to successfully cost a product, it is important to include these parts in to your overall product cost. So, managerial accounting focuses on chiefly how much money are each unit worth than the general cost that the product sells for. However, on the other side of the spectrum in financial accounting the focus is on financial units. Financial accounting is not worried about how much each unit costs, but care more about the sales cost of each object being sold.

financial accounting