The function of accounting is critical to a business’s financial performance. This field helps organizations keep track of every financial transaction or investment. Meanwhile, accounting can also guide what improvements need to be made. Both financial accounting and managerial accounting are among the essential fields of accounting. These accounting types provide necessary data to the organization. Nevertheless, financial accounting and managerial accounting are different when it comes to their primary recipients.
For example, financial accounting is a subset of bookkeeping that involves the process of gathering, analyzing, and disclosing a variety of transactions that result from corporate operations over time. Such activities are recorded while working on making one of the financial statements, which include the balance sheet, income statement, and cash flow statement (Weetman, 2019). They reflect the firm’s efficiency over a specific timeframe and are crucial to the regulating authorities.
Managerial or management accounting is a type of bookkeeping that generates reports, analyses, and documentation to assist managers in making better choices about the profitability of their firm. Managerial accounting is primarily utilized internally to improve a given situation and solve various issues. The primary goal of this type of accounting is to support top management in completing its tasks of planning, budgeting, coordinating, and monitoring (Weetman, 2019). Among the most notable managerial accounting reports are account receivable aging reports, cost managerial accounting reports, and performance reports.
As a result, management accounting is concerned with a company’s internal financial processes, whereas financial accounting is concerned with a firm’s external financial operations. Additionally, it is vital to mention that financial accounting deals with the regulator, who controls the reports. Meanwhile, managerial accounting helps solve internal problems and serves as a way of monitoring the financial situation of the company. Moreover, financial accounting results in various statements, such as cash flow or income statements and balance sheets. Performance report accounts receivable aging reports, and cost managerial accounting reports are among managerial documents.
Weetman, P. (2019). Financial and management accounting. Pearson.