Accounting Principles II: Managerial versus Financial Accounting

Managerial versus Financial Accounting

Financial statements are used by both external users and internal management and provide general information about the entire company. For example, the balance sheet reports total inventories and the income statement reports cost of goods sold, but the costs of individual products are not disclosed to the public. Internal management needs detailed information to make decisions about its business. A comparison of managerial and financial accounting shows the differences between the two sets of information.

Managerial and Financial Accounting Comparison

	*Managerial Accounting*	*Financial Accounting*
Users	Internal managers	Creditors, investors, analysts, and other external users
Guidelines for preparation	Flexible	GAAP—rigid
Purpose	Decision making and control information	General information for credit and investment decisions
Frequency of preparation	As needed	Annually and quarterly
Independent opinion	None required	Auditor's opinionopinion
Type of information	Specific to project or management action—may be detailed and include estimates	General purpose—very few estimates