Q1TI_3 - Horngren'S Financial And Managerial Accounting

Question

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA): 

3. Is not required to follow GAAP.

Step-by-Step Solution

Answer

GAAP refers to the accounting principles and guidelines and the correct answer is managerial accounting.

Step 1: Definition of GAAP

GAAP stands for Generally Accepted Accounting Principles and refers to some of the common sets of accounting standards that companies should follow.

Step 2: Identification of Accounting type

The correct option is managerial accounting

Financial accounting requires GAAP as they are prepared not for internal use but they are also prepared for external users but the managerial accounting is just for internal members of the organization and does not require GAAP guidelines.