Accounting Of Financial Records Of An Entity Essay

 Managerial accounting is defined as the activities carried out in a firm to provide its managers and other employees with financial and related information to help them make strategic, organizational, and operational decisions.

The essential difference between managerial accounting and financial accounting is that managerial accounting attends the needs of managers inside the organization, while financial accounting serves the needs of those outside the organization. There are also specific guidelines that are used (GAAP/IFRS) in financial accounting and is mandatory whereas there are no guidelines in managerial accounting and is not mandatory.

Financial accounting basically contains monetary information. But managerial accounting will contain both monetary and non-monetary issues that are helpful to the management. For example financial accounting will show only finance related data on a new product developed. But managerial accounting in addition to those data may also show other non-monetary data like expected time to develop the product, possible yield and risk associated with it, expected

More examples of managerial accounting would be how an individual Costco store is performing verses how the company as a whole is fairing against a competitor such as Walmart which this would be considered financial accounting. Another example for managerial accounting would be how a Costco store has lower turnover than another but for financial accounting it would come down to how the chain as a whole had performed. How Costco takes care of its employees by providing them with competitive wages and adequate healthcare while Walmart has low wages and inadequate healthcare this would be managerial accounting. Also how Costco’s employees seem to be more satisfied with their job and benefits they stay with the company where Walmart has a higher

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

There are two main fields you can go into. The first is financial accounting. Financial accounting focuses on the external users. This includes stockholders, agencies, suppliers, and creditors. When they prepare their reports such as the income statement and the balance sheet, they focus on the business as a whole. Managerial accounting serves internal users.

Existing and potential investors use the financial reporting in order to make an informed decision about whether or not to invest or continue to invest in the company by comparing the results obtained in the current year to that of the previous year as well as to other companies financial reporting. Lenders and other creditors use it for a credit check required by the National Credit Act in order to ensure that the company can settle its liabilities before enabling them to purchase on credit. SARS will use the reporting of a company to check the credibility of the company’s tax returns, ensuring that all necessary information regarding the amount owed to them is disclosed.

The primary difference between financial and managerial accounting is that financial accounting is used for external members of the company; they do not control or run the businesses’ operations. An example of external members would be customers and shareholders of the business. On the other hand, managerial accounting is used for internal members in the company such as managers and officers. The internal members use managerial accounting to increase efficiency and effectiveness within their company. According to accounting4management.com, financial accounting and managerial accounting have several differences, but they both depend on the same data.

3. Managerial Accounting deals with procuring of data for the organisation's management i.e. to serve the internal users with necessary accounting information to carry out the management tasks of planning, organising, actualising and controlling. " Management Accounting is the presentation of accounting Information in such a way as to assist management in creation of policy and in the day to day operations of an undertaking". 4. Financial Management deals with the process adopted by an organisation for taking financial decisions through analysing and interpretation of financial data for meeting the organisations objectives.

will not be able to survive in the long run. In order to show others

As stated in the AASB Framework, financial statements play an utmost important role to a variety of users, which mainly consist of the investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies, as well as the public, in making vital financial decisions. For accounting information to be ‘decision useful' to this groups of people, the financial information

The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ

Financial statements, also known as financial reports, record the financial activities of a business in short and long term. The four financial statements are: balance sheet, income statement, statement of retained earnings, and statement of cash flows. A balance sheet reports the assets, liabilities, and net equity on a company. An income statement reports income, expenses, and profits on a company. A statement of retained earnings shows a company 's changed retained earnings. The statement of cash flows shows a company 's cash flow activities, such as operating investing, and financing activities (“Financial statements”, 2007, para.1). Financial statements are very important to a company.

Managerial accounting is a set of methods used by managers to help them make effective and efficient decisions about financial resources. These methods were primarily designed to educate the decision makers within an organization. Managerial accounting primary focus is the whole company as well as segments within the organization, which are of major importance. Managerial accounting can be used strategically within a business to evaluate performance, pricing decisions, investments, and determining long range planning and policy development. Managerial accountants try to determine important factors to consider when trying to

Each type of financial statement has its own use to the public, shareholders and potential investors, they perform different roles.