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Managerial and Financial Accounting Report
FIN540 Accounting for Managerial Decision Making
Abstract
Financial accounting develops account information that is used by external parties such as
stockholders, suppliers, banks, and government regulatory agencies in their
decision-making. Management accounting develops confidential accounting information
that is used by managers within an organization. Management accounting is a complex
process of identifying, accumulating and analyzing information and then communicating
this information to managers to aid in fulfilling organizational objectives. Interpretation of
those analyses is also a large component of this discipline. This paper shall serve to
illustrate the key differences and how professional organizations, such as the Institute of
Management Accountants (IMA) influence organizations and standards.
Financial and Managerial Accounting: A Comparison
Financial accounting primary produces financial statements, such as profit and loss
statements, statements of cash flow and balance sheets; these types of statements are
primarily used for analysis by investors and government agencies but also internal
managers. An important constraint to remember is that financial statements are limited by
generally accepted accounting principles (GAAP). Management accounting reports fall
under no such constraints as they are often used to aid managers in an improved
management decision-making process (Pitts, Shargi, Gonzales, p.4)
While there are behavioral implications in financial accounting such as concerns about
how to measure and communicate economic phenomena such behavior considerations are
secondary, although executive compensation based on reported results may have
behavioral impacts. Management accounting is primarily concerned with measurements
and how reports will influence manager daily behavior.
Financial accounting is chiefly focused on the past and performs a historical evaluation of
