Mangerial And Financial Accounting Report

Managerial and Financial Accounting Report

The role of managerial accounting is increasing. These managers have to be able to increase effectively the involvement and size of organizations. These business managers also have to be aware of the rapid growth and enactment of technology. Managers also have to be familiar with the regulatory environment, be able to contend successfully globally and have an increase importance on excellence.

When examining the major differences between financial and managerial accounting, we find that with financial accounting the information is reported in statements. The financial statements objectively and periodically report the results of past operations and the financial condition of the business according to the Generally Accepted Accounting Principles (GAAP) (Vallabhaneni, 2003). Examples include shareholders, creditors, government agencies, and the public. On the other hand, managerial accounting information includes both historical and estimated data used by management in conducting daily operations, planning future operations, and developing overall business strategies (Vallabhaneni, 2003). Managerial accounting also includes information for decision-making, planning, directing, controlling an organization's operations, and appraising its competitive position. Managerial accounting has internal users of information. These users comprise of business managers at all levels in the organization. Financial accounting uses external users of information. These users include stockholders, financial analysts, lenders, unions, consumer groups, and government agencies. This is hard data, and must meet audit criteria to be acceptable. Managerial Accounting rules are set within the company to carry out management objectives related to adding value to the company. Managerial accounting data must only be relevant for management decisions.

As we take a closer look at reports, managerial accounting use cost of production reports for decision-making. These comprise preparing detailed plans, budgets, forecasts, and performance reports for internal decision makers. Managerial accounting aids managers plan and administrate the company's operations. Accountants prepare budgets to communicate management's goals in financial terms by identifying, measuring, accumulating, analyzing, interpreting, and communicating information. After a budget has been adopted, performance reports compare actual results with the budget. Cost accountants help management keep track of how much it costs a company to make the product, or service (Shpargalka, 1999). Financial accounting incorporates preparing business financial statements mainly for users outside the business. These reports are used by owners, potential owners of a business, and by people who have loaned company money. In addition, stockholders, suppliers, and banks also benefit from the financial reports that are generated (Horngreen, Stratton, & Sundem, 2002).

The table below will explain the differences between financial and managerial accounting (Weygandt, Kieso, & Kimmel, 2001).

Financial Accounting Managerial Accounting

Primary Users of Reports

External users, who are stockholders, creditors, and regulatory agencies Internal users, who are officers, department heads, managers, and supervisors in the company

Types and Frequency of Reports

Classified financial statements Issued quarterly and annually. Internal reports Issued as often as needed.

Purpose of Reports

To provide general-purpose information for all users To provide special-purpose information for a particular user for a specific decision

Content of Reports

Belongs to entity as a whole and is highly aggregated (condensed).

Limited to double-entry accounting system and cost data

Reporting standard is the Generally Accepted Accounting Principles. Refers to subunits of the entity and may be detailed

May extend beyond double-entry accounting system to any type of relevant data

Reporting standard is relevance to the decision to be made.

Verification Process

Annual independent audit by certified public accountant No independent audits.

As mention in our textbook appendix A, of Hilton−Maher−Selto, (2005), they are four ethical standards for managerial accountants that the Institute of Management Accountants (IMA) must have. These are having competence, being confidential, showing integrity, and being objective.

* Competence - In having competence, a managerial accountant must maintain expert knowledge and skills, follow laws, regulations, examine all suitable data, and provide complete information. In my line work, I refer competence to the ability to do my job. My earned knowledge, training and how I portrait this ability could depend in me saving someone's