Phase 1 Accounting in the Organization DB2
Colorado Technical University
Professor Lynn Sheik
Accounting can be broken down into many different categories and areas. Managerial and financial accounting is only two parts of the cost accounting system. Within these two different aspects of accounting there are many similarities and differences not only between these categories but also in their rules and regulations, management information and reporting requirements as well. The certifications of accountants are also differentiated in these two categories, CMA and CPA. No matter what category you place an accountant in; the job is crucial in the ...view middle of the document...
(Atkinson, Kaplan, Matsumura, & Young, 2012)
It is the use of accounting information for reporting to parties outside the company. The preparation of information is used for published financial statements and other financial reports. The focus of managerial accounting is on the needs of managers within the company rather than the interested parties outside the company. Some of the users of financial accounting information are current and prospective stockholders, lenders and investment analysts. The main similarity between them is that they both draw upon data from an organizations basic accounting system, mainly the cost accounting system. Financial statements are a necessity when it comes to businesses. They are used by both internal managers as well as outside users and provide information about the entire company. Managerial accounting is primarily used by individuals within a company or organization. The main purpose of financial accounting is to prepare financial reports that provide information about an organization performance to external parties like creditors, investors and tax authorities (Hilton, 2006).
There are several key differences between both managerial and financial accounting. The first key difference is in the purpose of each method. For example, managerial accountings purpose is in decision making and the control of information while financial accountings purpose is more general, as it used to provide general information for credit and investment decisions. Another key difference between the two types of accounting is frequency of preparation. In managerial accounting, reports can be created for any period of time (i.e. daily, weekly, monthly). Financial reports are usually generated for a set period of time, such as fiscal year. Managerial accounting reports are prepared utilizing scientific and statistical methods to arrive at monetary values (Financial, 2007). Examples of these reports include sales forecasting, budget analysis, and merger/consolidation reports. On the other hand, financial accounting focuses on the production of financial reports, including basic reporting on profitability (this is of specific interest to...