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Differences Between Managerial and Financial Accounting

Apr 14, 2025

Accounting 2301 Chapter 11 - Managerial Accounting vs. Financial Accounting

Introduction

  • Shift focus from financial accounting to managerial accounting.
  • Discuss differences between managerial and financial accounting.

Key Differences

Financial Accounting

  • Purpose: Focus on external financial reports for external users like creditors and investors.
  • Report Frequency: Reports are mandatory quarterly and annually to SEC.
  • Verification: Reports are audited by CPAs for submission to external users.

Managerial Accounting

  • Purpose: Focus on internal users within the company.
  • Flexibility: No generally accepted methods; reports are tailored to decision-making needs.
  • Report Frequency: Internal reports can be as frequent as needed (weekly, monthly, daily).
  • Content: No limitations on what can be included; data-driven for specific management needs.
  • Verification: No external audit required; relies on internal use accuracy.

Managerial Functions

Primary Functions

  1. Planning
    • Developing business plans.
  2. Directing
    • Implementing plans by organizing resources.
  3. Controlling
    • Monitoring and adjusting plans to meet goals.

Organizational Structure

  • Hierarchical overview: Stockholders → Board of Directors → CEO → Management levels.
  • Importance of tailored information for decision-making at different management levels.

Next Steps

  • Upcoming discussion on introductory concepts for managerial accounting.
  • Proceeding to more advanced topics in subsequent videos.