Managerial Accounting

Managerial Accounting

Managerial accounting is used in making decisions within an organization internally. Internal process efficiency is measured when managerial accounting is used. Valuable information is used by those in an organization in leadership roles. Managers who need to identify internally cost cutting measures use managerial accounting. This type of accounting looks at future trends and what can be done to increase and generate revenue. Examples of managerial accounting uses are comparing of budgets, managing resources, identifying future trends, evaluating market and product profitability, evaluating financial effects of strategies and using cost information for pricing and marketing. Business decisions that would be made based on managerial accounting are future employee hiring, expansion of departments or consolidation, launching of new products or services, and purchasing of equipment. Managerial accounting does not have to follow the Generally Accepted Accounting Principles (GAAP) guideline since the information is used internally.

Financial accounting is the preparing of financial statements for outside sources such as stockholders, suppliers, bankers, and government agencies. The statements are based on events that have already passed and are for a specific time period. Common time periods for these statements are annually and quarterly. Financial accounting is prepared using Generally Accepted Accounting Principles (GAAP) guidelines. Publically traded organizations who supply financial statements to its stockholders can expect them to be widely circulated. Those reports would reach competitors and investor analysts. The purpose of financial accounting is to have outside sources assessed the value of an organization. Financial accounting uses the system of double entry bookkeeping and follows the accrual basis of accounting. Reports generated in financial accounting have to be easy to understand and comparable to those of other organizations....