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Managerial Accounting 14th Edition by Ray Garrison ,Eric Noreen ,Peter Brewer 4
Edition 14ISBN: 978-0077909703Managerial Accounting 14th Edition by Ray Garrison ,Eric Noreen ,Peter Brewer 4
Edition 14ISBN: 978-0077909703 Exercise 1
How does managerial accounting differ from financial accounting
Explanation
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Accounting is known as the language of business. Accounting refers to the information system which aims at communicating accounting information to its various users. Financial accounting and managerial accounting are branches of accounting.
Financial accounting deals with the reporting of financial information to parties external to an organization, such as regulators, stockholder, and creditors. Managerial accounting deals with providing information to parties within an organization, mostly managers or decision makers.
For example, in financial accounting, one would produce reports that show how an entity has performed in the past. This information is often provided to owners, creditors, tax authorities, and regulators. It emphasizes objectivity and verifiability and must follow certain accounting rules such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
On the other hand, in managerial accounting, one produces reports to managers in areas within the entity dealing with planning, controlling and decision-making. The emphasis here is on making future decisions. What we are concerned with here is relevance to the future operations of the entity. Managerial accounting does not necessarily have to follow accounting rules such as GAAP or IFRS, although it often does.
Further, from reporting point of view financial accounting focuses on profitability whereas managerial accounting focuses on budgeting and other internal aspects and accounting particularly pertaining to costs.
Financial accounting deals with the reporting of financial information to parties external to an organization, such as regulators, stockholder, and creditors. Managerial accounting deals with providing information to parties within an organization, mostly managers or decision makers.
For example, in financial accounting, one would produce reports that show how an entity has performed in the past. This information is often provided to owners, creditors, tax authorities, and regulators. It emphasizes objectivity and verifiability and must follow certain accounting rules such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
On the other hand, in managerial accounting, one produces reports to managers in areas within the entity dealing with planning, controlling and decision-making. The emphasis here is on making future decisions. What we are concerned with here is relevance to the future operations of the entity. Managerial accounting does not necessarily have to follow accounting rules such as GAAP or IFRS, although it often does.
Further, from reporting point of view financial accounting focuses on profitability whereas managerial accounting focuses on budgeting and other internal aspects and accounting particularly pertaining to costs.
Managerial Accounting 14th Edition by Ray Garrison ,Eric Noreen ,Peter Brewer 4
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