Chapter 10, Problem 1Q

1. What are some differences between financial and managerial accounting?

To determine

The difference between financial and managerial accounting.

Explanation of Solution

Financial accounting: The process of recording, summarizing, and reporting all the financial transactions in the financial statement of the business over a specific period is known as financial accounting. The financial statement consists of the income statement, the cash flow statement, the statement of retained earnings, and balance sheet.

Managerial accounting is the process of finding, measuring, analysing, interpreting, and communicating information that are designed to meet the goals of the organization.

The differences between financial accounting and managerial accounting are as follows:

• Financial accounting is concerned with financial, historical, and regulated data of the company, whereas managerial accounting deals with economic, unregulated, and nonfinancial data.
• Financial information is mainly designed to meet the needs of outsiders such as creditors and investors, whereas managerial information is primarily used to meet the needs of insiders such as employees, managers, and executives.
• Financial accounting records all the data of past, present, and future and it is said to be a continuous reporting, whereas managerial accounting records only the past data from the annual report.