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Differences between financial and managerial accounting

* What are the differences between financial and managerial accounting?
* Describe the types of reporting used by financial and managerial accounting.

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Financial Accounting

Financial accounting presents stylized reports that are consistent from firm to firm. Financial accountants capture, organize and summarize the past transactions of the business into four standard reports, each showing a different aspect of the business to the outsiders of the firm that have an interest (typically called "stakeholders").

The first of these four reports is the Income Statement which presents the sales and the expenses of the firm for the period just ended. The second reports is the Balance Sheet which shows the resources and obligations of the firm at the end of the period. The third report is the Cash Flow Statement which shows all the inflows and outflows in the bank accounts over the period just ended. Finally, the last report is a detail of the changes in owner's equity over the period just ended. There are footnotes at the end of these four reports that explain the policies used, more detail on important items, and any unusual items.

There are rules and conventions dictating how these reports are crafted called Generally Accepted Accounting Principles (GAAP) and these differ somewhat depending on whether your business is in the United States or an international location (potentially adopting International Standards or a country-specific set of standards). When these reports are published, they typically contain an audited report ...

Solution Summary

Your response is 783 words (plus 3 references) and describes financial accounting, managerial accounting, and highlights the main differences. The typical reports for both types are mentioned along with the main distinctions between them.