The significance of financial accounting in the business world Hong Kong has long been a prestigious international financial centre attracting global enterprises investment. Being as competitive as in UK and the U.S., Hong Kong has its word-to-mouth sound financial reporting system, contributing to a healthy business environment. Audited financial reporting is mandatory for business enterprises to properly disclose appropriate information to public. Financial reporting plays a vital role in financial market and business environment not only in Hong Kong, but also in the whole business world. Financial accounting is the combination of finance and accounting, with the principal objective to provide information that is useful and relevant …show more content…
If the company borrows money from a bank, the bank is the creditor. The bank will conduct a detailed assessment on the company’s financial reports to adjust the interest rate. The interest rate climbs up if the company is very likely to default in the future. If the company issues corporate bonds, the bond buyers are the creditors. The public shall do a similar analysis to decide whether the bond is worth buying. When the company raises fund by capital, investors exist. No matter if it is Initial Public Offering or Seasonal Offering, the potential buyers of stock will decide whether the current stock price will go up. Apart from operation style and discrete business events in the future, what they rely on are the financial reports. In fact, the public may also review financial reports even though they do not directly invest in the company. The municipal government may subsidize some companies providing public services, such as railway and metro companies. The funds used as subsidy are actually from the pocket of taxpayers. The public has the right to understand whether these funds are used in appropriate ways. In such cases, they may make use of financial reports as well. Financial accounting is basically used by external users whereas management accounting is used by internal users. However, the management level also makes use of financial accounting to review the company’s financial situation, whether the company can
Financial Accounting is concerned with the past, while Managerial Accounting is concerned with the future.
managerial accounting deals with internal reporting and financial deals with internal reporting (Yes. Managerial accounting deals with internal reporting and financial accounting deals with external entities)
Financial accounting is the branch of accounting that organizes accounting information for presentation to interested parties outside of the organization. The primary financial
“The accounting system generates the information that satisfies two reporting needs that coexist within an organization: financial accounting and managerial accounting” (Schneider, 2012, ch 1.1, para 1). Managerial accounting is the process of preparing reports and accounts required by management to make business decisions for daily, weekly, monthly, and yearly projects. Financial accounting is the branch of accounting that organizes accounting information for presentation to interested parties outside of the organization. Financial accountants produce annual reports for external
Financial accounting is an information-processing system that generates general-purpose reports of financial operations (income statement and statement of cash flows) and financial position (balance sheet) for an organization. It is used by decision makers inside and outside the firm, such as security investors, analysts, and lenders. Adding to this external orientation are external financial reporting requirements determined by law and generally accepted accounting principles.
The structure of an organization will affect its financial management. Generally financial accounting is for outside use so they emphasize external reporting; which means they report to third parties such as; Medicare, Medicaid and other government entities and health plan payers. Managerial accounting is considered to be prospective as well as retrospective. It is of the upmost importance that the accountant must follow the guidelines principles and ethical standards of planning, controlling, organizing and directing, and decision making if they want to be successful at their job.
Critically examine the above statements by analysing the contribution of traditional management accounting techniques in an organisation, the necessity for modern management accounting techniques and the role of accountants in the implementation of the modern management accounting techniques in an organisation.
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 management is important to the organization because it provides pertinent finance and accounting information to help managers accomplish the purpose of the organization. Financial accounting provides accounting information to external users. On the other hand, managerial accounting is more for managers (internal users) to use for things like planning, budgeting, etc. The definition of finance has changed over the years, but it’s used to ultimately evaluate previous decisions and make assessments for future decisions of the organization.
The main purpose of financial accounting is to prepare financial reports that provide information about a firm’s performance to external parties such as investors, creditors, and tax authorities. Must be performed according to GAAP (Generally Accepted Accounting Principles) guidelines.
Financial statements of the company are significant for the investors who would like to venture into the business operation. It gives them the insight whether the business is making profits or it is doomed to fail;
Financial accounting is a crucial process for any successful business. Atrill and McLaney, 2013 define financial accounting as: “the identification, measurement and communication of accounting information for external users (those users other than the managers of the business).”
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.
Generally, the accounting professionals calling in the United States as well as in the whole world seemed to be focused on the readiness and examining of money related articulations. Many people consider Certified Public Accountants (CPAs) and different experts of accounting while saying financial accounting. In any case, in different parts of the world, management accounting order is a division of the accounting field (Sahi and Dua 2012). Management accounting and financial accounting are two distinct callings in such locales. Administration accounting, as a sub control, manages money related and non-monetary data to bolster a scope of administrative choices. Then again, money related accounting focuses on monetary information just to bolster both loan bosses' and financial specialists' choices on capital allotment (Kinney and Raiborn 2008). Management accounting fundamentally concentrates on enhancing business execution yet not guaranteeing that the business complies with the set measures. From this perspective, it is evident that monetary accounting dominates management
According to Will S, Ray H, & Eric E.N. (2009), management accounting is a branch of accounting that is concerned with providing information to managers who direct and control the firm’s operations. Management directing function seeks to effectively use both the human and raw material wealth of a firm to achieve organizational set objectives on routine basis. Controlling function is the art of tele-guarding the activities of the organization to consistently fall in line with set objectives. Management accounting achieves this function through effective budgeting.