Introduction
Experts in accounting should understand the intersections between managerial accounting and financial accounting. Both approaches main aim is to help the organization understand the financial metrics. In accounting, data is gathered analytically to develop insight. These accounting methods are used in delivering facts vital for an organization’s decision-making. Managerial accounting methods vary from financial accounting in different ways. As proclaimed by Managerial accounting is intended to help the organization’s bosses make assessments, while financial accounting is designed to give information to external groups. As termed by accounting professionals, managerial accounting is mostly referred to as cost accounting, a method used to understand, investigate, calculate, categorize, and link data in defining the organizational goal (Roychowdhury, Shroff & Verdi, 2019).
Background
To many people, financial and management accounting are very conflicting when trying to differentiate. However, as illustrated below, both concepts are very different. This is from a critical analysis and study conducted in TIGER Manufacturing company in the United States of America. I conducted research through interviews and observation from different company levels to understand the comparison between managerial accounting and financial accounting concepts. To understand the variance, you ought to know the scope of each and its application. However, both accounting concepts complement each other in the financial strategy of a business. The main focus of managerial accounting is the internal financial process of the organization, while financial accounting focuses on financial processes externally.
Managerial and financial accounting concepts play a vital role as far as financial recognition is concerned. As proclaimed by Narayanaswamy 2022, managerial accounting is often used in short- and long-term choice-making concerning the organization’s financial well-being. Through the concept, managers can make decisions for long-term investment. As claimed by Horsfall 2023, Financial accounting reports are also oriented towards forming financial accounts distributed internally and externally of the organization. On the other hand, operational reports distributed within the organization come from managerial accounting statements.
In managerial accounting, there are no set policies or rules to follow. The managerial accounting process is carried out internally; hence no need for imposing regulations and rules as a requirement following the accounting standards. On the other hand, financial accounting reports are governed by laid standards and regulations. IFRS and GAAP govern the accounting statements (Kamal, Hussain & Khan,2021). Th e process of external publication requires organizations to follow the regulations to dispatch correct data and information. Both frameworks are aimed at determining how firms determine their financials. In corporate America, GAAP is the only standard principle that companies can use when reporting their financial status. IFAS, on the other side, is an internationally accepted principle for declaring financial reports.
Financial accounting, on the hand, has played a great role in impacting society. The process for organizations and businesses to handle money and corporate finance through appropriate recording and tracking have helped society with resource management, accountability, and accounting knowledge. However, in financial accounting, big firms are in a position to know their liabilities and resources (Weetman, 2019). Moreover, reliable investors from society can check the financial accounting reports of different firms to decide where to invest.
The managerial and accounting reports may sometimes be backdated. However, backdating is illegal, though when both parties agree, the process is legal. For instance, as I was conducting my interviews, the Tiger manufacturing company manager backdated the accounting reports on a few occasions. This resulted from an improper misinterpretation of the financial accounting reports by external parties. They backdated the report to fulfill the case.
Method
Basic research has been conducted. The importance of the research paper is to understand the comparison between managerial accounting and financial accounting. The research analyzes and expounds on the similarities and differences between the two accounting concepts based on policy, scope, impact on society, taxation, CPA firms, and corporate America. A correlational study was conducted by Tiger manufacturing company to come up with better findings. Observations and interviews of managers and the accounting team were the methods used in the whole process.
Results
The main difference between managerial and financial accounting will be accentuated throughout the paper (Elliot and Elliot (2017). According to his findings, financial reporting or accounting is when a professional accountant keeps track of and generates a report on all financial operations the business or organization executes. According to the findings of (), managerial accounting purposely plays a significant role in discharging managerial functions. The concept emerges to solve the complexity lining in today’s business structure regarding the decision-making process. The thought attempts to simplify decision-making and planning, leading to a better organizational outcome. Managerial accounting cuts through all management levels since every management plays a role in decision-making.
From my findings, the managers of Tiger manufacturing company publish the managerial accounting report and distribute it across the management upon approval in different management sections. However, I discovered that, for the management to give out the financial accounting report, GAAP and IFAS policies must be used. Managerial accounting reports are internal from the accounts team, while financial accountant reports are used externally.
Conclusion
The verdicts clearly show that financial accounting is more concerned with informing the external part of the organization. Although, the concept has minimal importance internally. On the other hand, it generates a useful report about the firm internally. Both accounting approaches play a significant role in the financial recognition of the firm. Moreover, financial accounting is glued under policies, while managerial accounting is not.
REFERENCE
Horsfall, K. (2023). MANAGERIAL ACCOUNTING AND BUSINESS START UP IN RIVES STATE. BW Academic Journal, 1(1), 9-9.
Kamal, A., Hussain, T., & Khan, M. M. S. (2021). Impact of Financial inclusion and financial stability: Empirical and theoretical review. Liberal Arts and Social Sciences International Journal (LASSIJ), 5(1), 510-524.
Narayanaswamy, R. (2022). Financial accounting: a managerial perspective. PHI Learning Pvt. Ltd..
Roychowdhury, S., Shroff, N., & Verdi, R. S. (2019). The effects of financial reporting and disclosure on corporate investment: A review. Journal of Accounting and Economics, 68(2-3), 101246.
Weetman, P. (2019). Financial and management accounting. Pearson UK.
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