Q2RQ - Horngren'S Financial And Managerial Accounting

Question

List six differences between financial accounting and managerial accounting.

Step-by-Step Solution

Answer

Financial accounting provides information for external users and the difference between financial accounting and managerial accounting is prepared.

Step 1: Definition of financial accounting

Financial accounting is defined as the field of accounting that focuses on providing information for the external decision-makers.

Step 2: Difference between financial accounting and managerial accounting

	Financial Accounting	Managerial Accounting
Primary Users	External – Investors, creditors	Internal - the company’s management and employees
Purpose of information	Help investors and creditors make investment and credit decisions	Help managers and employees plan, direct, and control
Focus and time dimension of the information	Relevant and faithfully representative information and focus on the past	Relevant information and focus on the future
Rules and restriction	GAAP are followed	Not required to follow GAAP
Scope of information	Summary reports are prepared on the company as a whole	Detailed reports prepared on parts of the company
Behavioural	Concern about the adequacy of disclosures	Concern about how reports will affect employee behaviour.