Financial accounting and Managerial accounting play an equal role for any type of
business. Not only should the business be managed appropriately but must be financed
properly. These two types of accounting have many similarities and differences between
them. Both managerial and financial accounts have responsibility to manage in
confidentiality, competence and integrity.
The purpose of Managerial accounting is to identify, analyze, measure, interpret and
communicate the pursuit of an organizations goals and operations (Horngren, Sundem,
Stratton, Burgstahler, Schatzberg, 2008, pg.5). This type of accounting helps the business
make strategical decisions based on financial reports (balance sheets). In addition, it deals
with the preparation of budgets to determine the allocation of the resources. Managerial
accounting is generally used by mangers to help determine salary increases and or lay-offs.
The purpose of financial accounting is to provide information on the well-being of a
business to outside (external) stakeholders. This includes mortgage holders, share holders
and government agencies. (Horngren, Sundem, Stratton, Burgstahler, Schatzberg, 2008,
pg.5) In other words, information is provided to parties who were involved in the financing
of the business. In addition, it has the same process as managerial accounting but prepares
past and present reports to internal and external parties.
In contrast, financial accounting deals with the financial matters of a business such as; in
and outflow of money, investments, expenses and revenues. Management accounting deals