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Financial Accounting Financial accounting involves the preparation of a businesss
financial statements, mainly for users outside the business. These reports are used by
owners, potential owners of a business, and by people who have loaned a company money.
Some government agencies that regulate business and the stock market require companies
to submit financial statements to them. Additionally, stockholders, suppliers, and banks
also benefit from the financial reports that are generated. (Horngreen, Stratton, & Sundem,
p. 5) Managerial Accounting Managerial accounting helps managers plan and control a
companys operations. Accountants prepare budgets to express managements goals in
financial terms by identifying, measuring, accumulating, analyzing, interpreting, and
communicating information. After a budget has been adopted, performance reports
compare actual results with the budget. Cost accountants help management keep track of
how much it costs a company to make the product, or provide the service, it sells.
(Horngreen, Stratton, & Sundem, p. 5) Rules and Regulations In financial accounting, it is
limited by a widely accepted set of rules, standards, and procedures for reporting financial
information known as the generally accepted accounting principles (GAAP), as established
by the Financial Accounting Standards Board (FASB). This standard requires that a
company "account for all of their assets or economic resources according to their historical
cost." (Horngreen, Stratton, & Sundem, p. 6) Managerial accounting does not require the
implementation of the rules and procedures of the GAAP. Management of an organization
can create any type of internal accounting system that will work best for their company.
However, they need to be aware of the costs that the implementation of such a system.
(Horngreen, Stratton, & Sundem, p. 6) They also need to take into account the information
that needs to be kept. More than one set of records is usually the norm
