Chapter 1, Problem 1Q

To determine

Accounting: The practice of knowledge mainly involved with different procedures of transaction recording, performing audits, maintaining records, reporting and analyzing of monetary information is termed as accounting.

To determine the difference between financial and managerial accounting.

Explanation of Solution

Financial Accounting: Financial accounting is a procedure of recording, reporting and encapsulating the transactions coming from business operations for a particular time frame. The transactions consist of summarized reports mandatory for the preparation of monetary statements comprising “balance sheets, cash flow and income statement,” which capture the organization’s performance for the precise time frame. Financial accounting is the mechanism of collecting, identifying and encapsulating the monetary transactions.

Managerial Accounting: The procedure which recognizes, evaluates, interprets and transfers information for the pursuit of enterprise goals is termed as managerial accounting. The information given by managerial accounting is used by the managerial staff in the organization to accomplish goals of the company and to take key decisions.

Difference between Managerial and Financial Accounting:

Financial Accounting	Managerial Accounting
This is the mechanism of collecting, identifying and encapsulating the monetary transactions.	The procedure which helps management to make key decisions to improve the profitability.
The information provided from this branch is used by the external agencies such as shareholders.	This accounting branch is useful to the managerial staff.
All companies need to maintain their financial accounts.	The management accounting branch is optional in the enterprise, but in the current scenario it is essential to maintain to make corrective decisions.

Conclusion

Thus, these are the major differences between managerial accounting and financial accounting.