CH.1 Managerial Accounting and the Business Environment

Comparison of Financial and Managerial Accounting

- Financial Accounting:

• Is concerned with reports made to those outside the organization.
• Summarizes the financial consequences of past activities.
• Emphasizes precision and verifiability.
• Summarizes data for the entire organization.
• Must follow GAAP since the reports are made to outsiders and are audited.
• Is required for publicly-held companies and by lenders. 

- Managerial Accounting:

• Is concerned with information for the internal use of management.
• Emphasizes the future.
• Emphasizes relevance and flexibility of data.
• Places more emphasis on non-monetary data and timeliness and less emphasis on precision.
• Emphasizes the segments of an organization rather than the organization as a whole.
• Is not governed by GAAP.
• Is not required by external regulatory bodies or by lenders.