Chapter 1, Problem S1.1SE

To determine

Financial Accounting v/s Managerial Accounting:

Financial accounting or reporting is used to prepare financial statements to present the financial position of the entity. Financial accounting is mandatory for an entity and it has to follow Generally Accepted Accounting Policies (GAAP) for accounting. The statements produced under financial accounting include the Income statement, balance sheet and statement of cash flows. Users for financial information can be internal as well as external like Lenders, Creditors, Government, Employees, and Owners etc.

On the other hand, managerial accounting is used for the purpose of generating internal reports and it is not mandatory for an organization. Reports generated using managerial accountings are budgets, Inventory usage, efficiency reports etc. Users of managerial accounting reports are only internal people like Managers, Directors, head of departments etc.

To identify:

The type of accounting information used by the user, Financial or managerial