Compare and contrast financial accounting and managerial accounting.

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Similarities

  1. Both managerial and financial accounting requires the accountant to pay attention to the company's finances and report their findings.
  2. Both types of accounting require some knowledge of accounting principles.
  3. Both managerial and financial accounting show the firm’s financial health.

Differences

  1. Financial accounting is standardized. It doesn’t matter which organization prepares the balance sheet or income statement: the format is the same. Financial statements have to be standardized so that stakeholders can understand them. Since managerial accounting is mostly for internal use, organizations can create unique formats for the reports.
  2. Financial accounting is for the firm’s stakeholders. They include the government, media, shareholders, and any other party affected by the business. On the other hand, managerial accounting is for managers. They use the data to make decisions that affect the organization.
  3. Financial accounting reports financial data from the past while management accounting is focused on predicting future performance.
  4. Financial accounting describes the general financial performance of the organization while management accounting is prepared to cater to the needs of the management.
  5. Managerial accounting mostly uses estimates while financial accounting is based on actual data.
  6. In financial accounting, the statement is usually prepared at the end of one year. Managerial accounting reports tend to more frequent.
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