Accounting gained popularity across different industries, with financial (FA) and managerial accounting (MA) being the two major types. According to Accounting Stuff (2019), the former reports “entity’s financial transactions” to extant and prospective creditors, lenders, or investors (2:04). Meanwhile, the latter communicates financial analyses to the administrators “to assist them in planning, decision-making, and risk management” (Accounting Stuff, 2019, 2:23). Hence, the first two noteworthy differences are the target audience and the timeline. FA demonstrates to the company’s sponsors that their investments were used fairly and effectively, while MA guides inner executives’ future business decisions (Accounting Stuff, 2019). The third and fourth differences lie in the scope of reach and objectiveness: while FA presents a broad, objective, and precise picture of the entire business, MA produces section-specific, relevant, and timely reports (Accounting Stuff, 2019). To guide decision-making, MA presents more “nonmonetary” information, for instance, average production times or customer satisfaction (Jiambalvo, 2019, p. 6). Lastly, internal reports (MA-produced) are non-mandatory and less heavily regulated than FA reports, which are required beyond a specific business size and must meet GAAP and IFRS standards (Accounting Stuff, 2019). Overall, these branches serve different purposes and have unique value to different stakeholders.
Reference
Accounting Stuff. (2019). Financial vs. managerial accounting [Video]. YouTube. Web.
Jiambalvo, J. (2019). Managerial Accounting. John Wiley & Sons.