Managerial and Financial Accounting Repor
Managerial Accounting and Finance Foundations
FIN 540
February 27, 2006
Financial Accounting vs. Managerial Accounting
The key difference between financial and managerial accounting is that financial
accounting is aimed at providing information to parties outside the organization. In
contrast, managerial accounting information is aimed at helping managers within the
organization make decisions. According to Kieso and Weygant, financial accounting is the
process that culminates in the preparation of financial reports relative to an enterprise as a
whole for use by parties both internal and external to the enterprise. In contrast, managerial
accounting is the process of identification of financial information used by management to
plan, evaluate, and control within an organization and to assure appropriate use of, and
accountability for, its resources (p. 3). Below summarizes the difference between
managerial and financial accounting:
Financial Accounting has been characterized as the branch of accounting that focuses on
the general purpose reports of financial position and results of operations known as
financial statements. These statements provide a continual history quantified in money
terms of economic resources and obligations of business enterprise and of economic
activities that change these resources and obligations. The following are the objectives of
Financial Accounting/Reporting, to provide:
1. Information that is useful in investment and credit decisions.
2. Information that is useful in assessing cash flow prospects.
3. Information that about the enterprise resources; claims to those resources and changes in
them.
Managerial accounting assists managers in carrying out their responsibilities, which
include planning, directing and motivating, and controlling. Since managerial accounting
is geared to the needs of the manager rather than to the needs of outsiders, it differs
