Introduction
Financial accounting refers to an accounting branch helps in keeping track of the information of the company regarding financial transactions. The implementation of financial accounting in a company requires the use of standardized guidelines that provide an avenue for recording, summarizing, and presenting financial information regarding transactions in the company. The objective of financial accounting in companies is to prepare accurate financial statements regarding the critical aspects of the company (Kim, Schmidgall, & Damitio, 2017). On the other hand, managerial accounting is a form of accounting that provides fast information to managers and other key stakeholders that are responsible for making crucial decisions regarding an organization. The primary objective of managerial accounting is to help in making weekly or monthly budgeting for an organization to allow the stakeholders inappropriate choices that are necessary for enhancing the operations of the organization to increase efficiency and effectiveness (Ciuhureanu, 2012).
Variances between Financial and Managerial Accounting
The application of financial and managerial accounting in the organization creates a significant disparity between the two forms of accounting. Firstly, financial accounting focuses on the provision of financial information to people outside an organization such as shareholders while managerial accounting focuses on the provision of information to people within the organization such as the managers (Topor, Ivan, Capusneanu, & Cokins, 2017). Secondly, the implementation of financial accounting in organizations is a requirement of the law that defines specific and standards that are required for the practical completion of the given financial information. On the contrary, managerial accounting is an optional form of account that is not needed for the law and does not require specific formats or standards for proper completion. Lastly, financial accounting focuses on covering an entire organization through the provision of transactions and financial information that is relevant to the whole organization. Managerial accounting on the other side is concerned with particular aspects of the organization such as product, cost, and marketing among others (Russo, Mertins, & Ray, 2013).
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Similarities between Financial and Managerial Accounting
Both financial and managerial Accounting capitalizes on the provision of relevant and useful business information. Financial accounting provides financial information regarding the running of a company to the existing and potential investors, and other stakeholders that are interested in the running of the organization based on the critical information of the company (Houke, 2017). The managerial accounting provides useful financial information to internal managers to ensure effective decisions are made regarding a company. The second similarity entails the aspect the generation of financial reports. Both commercial and managerial accounting capitalizes on the use of report formats in preparing the information to ensure that the review of the data is swift to overcome any form of vagueness (Spraakman, O'Grady, Askarany, & Akroyd, 2015). The other critical similarity entails the need for having accounting education expertise. Considering that both managerial and financial accounting are forms of accounting, they require education expertise, which requires individuals undertaking the given fields to conduct accounting programs. Companies need having accountants with a certain level of certification to allow in taking both managerial and financial accounting effectively.
Real-Life Example on Managerial Accounting
Considering that managerial accounting focuses on short-term accounting, it plays a critical role in helping managers to improve their financial and operational performances. A real-life example indicating how administrative accounting assist managers to improve the financial and operational positions of the organization involves an internet company that rented out servers with Amazon services. Considering that the prices to rent space on Amazon servers had faced a significant increase, the internet company capitalized on reducing costs associated with renting out space and focused on increasing operational efficiencies. Managerial accounting of the company engaged in the development of various budgets on a weekly basis to provide managers with an insight of the nature of the financial information presented to assist in making proper and informed decisions regarding the operational and financial performance. The managers of the internet company used the budgets created to identify whether the increase in prices was too much, which was an essential aspect in signaling managers on their next course of action regarding their expectations on prices.
Conclusion
In conclusion, managerial accounting is a form of accounting that provides fast information to managers and other key stakeholders that are responsible for making crucial decisions regarding an organization. On the other hand, financial accounting refers to an accounting branch helps in keeping track of the information of the company regarding financial transactions. Financial accounting focuses on the provision of financial information to people outside an organization such as shareholders while managerial accounting focuses on the provision of information to people within the organization such as the managers. Both financial and managerial Accounting capitalizes on the provision of relevant and useful business information. Both commercial and managerial accounting capitalizes on the use of report formats in preparing the data to ensure that the review of the data is swift to overcome any form of vagueness. Considering that managerial accounting focuses on short-term accounting, it plays a critical role in helping managers to improve their financial and operational performances.
References
Ciuhureanu, A. T. (2012). The dualism of the accounting activity of the company. Characteristics of the managerial accounting and implications in the management of the company. OF THE UNIVERSITY OF PETROŞANI~ ECONOMICS~ , 93.
Houke, C. (2017). Designing and Using Projects with Real World Application in an MBA Managerial Accounting Class: The Case of the Balanced Scorecard. Learning in Higher Education , 33.
Kim, M., Schmidgall, R. S., & Damitio, J. W. (2017). Essential Managerial Accounting Skills for Lodging Industry Managers: The Third Phase of a Repeated Cross-Sectional Study. International Journal of Hospitality & Tourism Administration , 18 (1), 23-40.
Russo, C. J., Mertins, L., & Ray, M. (2013). Psychological type and academic performance in the managerial accounting course. Journal of Education for Business , 88 (4), 210-215.
Spraakman, G., O'Grady, W., Askarany, D., & Akroyd, C. (2015). Employers’ perceptions of information technology competency requirements for management accounting graduates. Accounting Education , 24 (5), 403-422.
Topor, D. I., Ivan, O. R., Capusneanu, S., & Cokins, G. (2017). The hidden costs of self-management services in the accounting activity of a company. Audit Financia l, 15 (146), 244-253.
