Chapter 1, Problem 1Q

What is the primary difference between financial accounting and managerial accounting?

To determine

Concept introduction:

Financial accounting is an art of recording, summarizing and presenting the financial information in a appropriate output. The person who does accounting is called “Accountant”. The accountant follows some principles to do the Accounting; the principles are called ‘Accounting Principle’.

Managerial accounting is the branch of accounting used to generate reports for the purpose of decision makings by managers and his team. The manager uses various types of reports like cost report to take the decision on the costing. The cost of the product is helps us to find out the profit of business.

To indicate:

The Primary difference between financial and managerial accounting

Answer to Problem 1Q

Primary difference between managerial and financial accounting is that financial is used by the external parties and the managerial is used by the internal parties.

Explanation of Solution

Financial accounting is an art of recording, summarizing and presenting the financial information in a appropriate output. The person who does accounting is called “Accountant”. The accountant follows some principles to do the Accounting; the principles are called ‘Accounting Principle’.

Managerial accounting is the branch of accounting used to generate reports for the purpose of decision makings by managers and his team. The manager uses various types of reports like cost report to take the decision on the costing. The cost of the product is helps us to find out the profit of business.

Managerial accounting is used by the internal managers to make decisions and apply them in organization and managerial accounting is future oriented. On other hand financial accounting is used by the external parties to decide that how the business is working it is historical in nature.