Accounting refers to the science and art of making systematic records, measurements, and communications with regards to financial disclosure. The discipline has vital variables such as assets, liabilities, equity, revenue, expenses, transactions, and reporting. Types/branches of accounting include financial accounting, managerial accounting, cost accounting, auditing, tax accounting, accounting information systems, government accounting, fiduciary accounting, and forensic accounting. The paper gives a distinction between financial accounting and managerial accounting.
Financial accounting refers to the preparation and presentation of financial transactions per the generally accepted accounting principles. The records are useful for both external and internal users. Managerial accounting preparation and presentation of financial records without necessarily adhering to generally accepted accounting principles ( Warren et al., 2016) . The information is useful for cost analysis, evaluation, and budgeting, forecasting, and financial analysis within the organization. The two types of accounting have various similarities. First, both types of accounting give vital financial records to users, both internal and external stakeholders. Secondly, both types of accounting give users financial information in terms of report; both cases generate financial reports. Thirdly both use similar accounting concepts and principles.
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Managerial accounting and financial accounting have distinctive features. First, managerial accounting focuses on information for internal use, while financial accounting generates financial reports useful for both internal and external stakeholders. Secondly, financial accounting entails historical records for a given period; on the other hand, managerial accounting analyzes financial information for future use. Third, reports on financial accounting base on cases while reports on managerial accounting emphasize on abstracts and models ( Weygandt et al., 2018) .
Fourth, while financial accounting is a legal necessity required of companies, managerial accounting is a decision of an organization. Accounting standards serve to harmonize business practices. By adopting international accounting standards, the business environment manages to facilitate international flow of capital, lower cost of capital, reduce costs for investors, and increase market liquidity. Standardization ensures that there is consistency in making transaction records. It helps in maintaining uniformity in handling of financial information. The principle also allows mobility of accounting professionalism due to the use of similar accounting standards. Standardization of financial records also serves a crucial purpose to investors and financial analysts. Fifth, profitability is a significant concern in financial accounting; managerial accounting focuses on future predictions. Lastly, accuracy and precision are part of financial accounting, while managerial accounting mostly uses estimations.
Reference
Warren, C., Reeve, J. M., & Duchac, J. (2016). Financial & managerial accounting . Cengage Learning.
Weygandt, J. J., Kimmel, P. D., Kieso, D. E., & Aly, I. M. (2018). Managerial Accounting: Tools for Business Decision-making . John Wiley & Sons.
