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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

What are the major differences between financial accounting and managerial accounting?

To determine

Financial accounting:

Financial accounting is the process of recording, summarizing, and reporting all the transactions in the financial statement of the business over a period of time. The financial statement consists of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Managerial accounting:

Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information which are designed to meet the goals of the organization.

To determine: The major difference between financial accounting and managerial accounting.

Explanation

The major difference between financial accounting and managerial accounting are as follows:

  • Financial accounting is reported in the financial statement that is useful to external users as well as to the company management. Managerial accounting is only used by the management.
  • Financial accounting information is objective in nature whereas the managerial accounting information is both objective and subjective in nature.
  • Financial accounting guidelines are prepared according to GAAP guidelines. Managerial accounting guidelines are prepared according to the management needs.
  • Financial accounting reports are prepared at fixed intervals and the managerial accounting are prepared at fixed intervals and on the basis of the requirement.
  • In financial accounting, the financial statement is reported for the whole company whereas in the managerial accounting, the reports are reported either for whole company or for each segment

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