What are the similarities and differences in Financial and Managerial Accounting?

 

Answer:

Definitions of Financial Accounting and Managerial accounting:

Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use.

Managerial accounting is the practice of identifying, measuring, analyzing, interpreting, and communicating financial information to managers for the pursuit of an organization's goals.

Similarities between Financial & Management Accounting:

1. Both are the parts of total accounting information system.

2. Economic events are dealt in the both system of accounts.

3. The economic events are qualified only in terms of rupees.

4. Both are concerned with financial statements, revenues, expenses, assets, liabilities and cash flows.

5. Both the system of accounts are accumulating and classifying the accounting information for the preparation of financial statements.

6. Some database is used for preparing financial statements and reports under both system of accounts.

7. Both are determining and measurement of costs for different accounting periods and even for different departments and sections.

8. The same accounting principles and concepts are used in both system of accounts for the purpose of cost accumulation and cost allocation.

Differences between financial and managerial accounting:

1. Managerial accounting is used strictly for internal purposes, while financial accounting provides financial information based on accounting standards.

2. Managerial accounting frequently looks ahead, while financial accounting offers analysis of historical data.

3. Managerial accounting typically runs a variety of operational reports throughout the month, while financial accounting runs financial statements at the end of the accounting period.

4. Managerial accounting uses estimated amounts, while financial accounting only uses actual numbers.

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