Question

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Indicate whether the following statements describe financial accounting or managerial accounting.

Largely based on forecasting future sales and cash flows, calculating costs and preparing budgets.

is concerned with collecting data of historical nature.

Reports are very detailed and provide a wealth of information.

Must follow Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) set by professional bodies.

Primarily prepared for external users such as creditors and stockholders so that they can make sound financial or investment decisions.

Does not require independent examination.

Answer 1

Solution

	Classification
Largely based on,…………….and preparing budgets	Managerial accounting
Is concerned…………….historical nature.	Financial accounting
Reports are very ……………information	Managerial accounting
Must follow GAAP………………….professional bodies.	Financial accounting
Primary prepared ……………..investment decision.	Financial accounting
Does not……………..examination	Managerial accounting

Managerial accounting is done for the internal management for day to day decision making such as pricing, special order, transfer etc.

Financial accounting is done in regulation with GAAP or IFRS(whichever is applicable) and the statements are reported to investors, creditors etc.