Question

WEEK 4: MANAGERIAL ACCOUNTING

Both financial and managerial accounting are important to a company’s success.

Which do you think is more important and why?

Answer 1

Accounting is very important in running a successful business. Accounting serves a source for all financial information relating to the business and economic transactions. Management and executive can take the important financial decision relying upon the accounting information. There are two types of accounting system, one being the Financial accounting and the other being Management accounting.

1. Financial accounting: it is the accounting system wherein financial data and information are prepared for both internal and external parties. The outsiders like stakeholders, tax authorities, make use of these reports for their respective decisions like investments, merger, tax calculations etc. The financial accounting reporting has to follow certain rules and regulation of the controlling authorities like accounting standard board or Security exchange boards etc for true and fair view of the books of accounts.

2. Management accounting: It is the accounting system which is particularly internal to the business organization. It is prepared by the accountants or financial analyst for management or board for taking business decisions. It presents the budgets, forecasts, expense or income trends, employee counts and costs, profitability statements etc which are internal to the organisation. This is not shared like in case of financial accounting.

For the success of the business organization both are very important hand in hand. Any company to succeed need to have proper financial accounting system to gain the faith of its stakeholders. It has to follow rules and regulation of presenting its books of accounts to run smooth business without any penalties or punishment from the regulatory authorities.

Same goes with Management accounting, for strong business decisions management has to get correct and timely management accounting report from its analysts to take business decisions which will help in growing the business and will have have a better control on financial and economical situations.