Question

[A Financial accounting information and managerial accounting information have a number of distinguishing characteristics. To submit your answer, number your answer space 1 through 10 (corresponding to the numbering of the items below). For each of the characteristics listed below, indicate which characteristics are more closely related to financial accounting by placing the letter "F" in the space to the left of the item and indicate those characteristics which are more closely associated with managerial accounting by placing the letter "M" to the left of the item. 1. General-purpose reports 2. Reports are used internally Prepared in accordance with generally accepted accounting principles Special purpose reports 3 4. 5 Limited to historical cost data 6. Reporting standard is relevance to the decision to be made 7. Financial statements Reports generally pertain to the business as a whole 8. 9. Reports generally pertain to subunits 10 Reports issued quarterly or annually [B] Useing ALL of the 10 terms above, write a paragraph that CLEARLY distinguishes between financial accounting and managerial accounting. Hint Your paragraph should not be a mere repeat of the items above, but also include a DISCUSSION in such a way that the reader will know the difference between financial and managerial account.g

Answer 1

Ans-

1	General purpose reports	F
2	Reports are used internally	M
3	Prepared in accordance with generally accepted accounting principles	F
4	Special purpose reports	M
5	Limited to historical cost data	F
6	Reporting standard is relevance to the decision to be made	M
7	Financial statements	F
8	Reports generally pertain to the business as a whole	F
9	Reports generally pertain to subunits.	M
10	Reports issued quarterly or annually	F

Difference between Managerial and Financial Accounting

Basis	Financial Accounting	Management Accounting
1. Users	Internal and external General-purpose financial statements can be used by external and internal users. However, they are prepared pimarily for external users, such as the investors, lenders and creditors, and the government.	Internal The reports prepared in managerial accounting are strictly for use by internal users, i.e. the management.
2. Compliance with accounting standards	Required Financial accounting requires strict compliance with established accounting standards.	Not required Management accounting is not required to follow accounting standards since the only users are the members of the management.
3. Time orientation	Historical Financial accounting processes historical information and summarizes them in the preparation of financial statements.	Current and future Management accounting deals with current problems of the company. Also, management accounting involves the preparation of budgets and forecasts.
4. Emphasis	Reliability, verifiability, objectivity of financial information	Relevance and timeliness, to provide the maximum aid in management decisions
5. Necessity	Mandatory Financial accounting is required by law. Companies are mandated to furnish financial statements periodically.	Optional Management accounting is not mandatory. However, a company that does not use it will suffer great consequences.
6. Purpose of reports	General-purpose Financial statements provide general information, addressing the common needs of its users.	Special-purpose The financial reports in managerial accounting address a specific issue or concern.
7. Details of reports	Concise Financial statements present data in an summarized and concise way.	More detailed Financial reports carefully detail all information that the management should consider in making specific decisions.
8. Sources of data	Sources within the company, i.e. the accounting records of the company	Any source, both internal and external such as interest rates, political environment, economic and industry concerns, etc.
9. Frequency of reports	Financial statements are usually furnished monthly, quarterly, annually.	Financial reports in management accounting are prepared as the need arises.