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You have recently hired a new assistant, Sally Jones, who previously worked in a financial accounting office preparing journal entries and financial statements. While your new assistant has experience with and fully understands financial accounting, she has no experience with managerial accounting.


In a memo to your new assistant, Sally Jones, explain to her the similarities and differences between financial and managerial accounting. Provide examples of managerial accounting reports she could expect to see within SAC, and explain how management might use the information to make decisions.


The Sparklin Automotive Company (SAC) has been in business since 1930. It began business in the United States supplying spark plugs to automotive manufacturers (OEM, the original equipment market) and the automotive aftermarket.

SAC has introduced a new spark plug manufacturing process in the United States that produces a higher quality spark plug guaranteed to last 100,000 miles. The introduction of this spark plug has been very successful in the United States.

In addition to these types of projects, your responsibilities include creating and analyzing the monthly performance of each plant and consolidating the results into a set of financial statements footnoted with explanations.

APA Format, 3 to 4 references.

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TO: Sally Jones, Assistant Financial Services, SAC
FROM: John Mason, CFO, SAC
DATE: February 18, 20xx
SUBJECT: Financial and Managerial Accounting:

The present memo explains to you the similarities and differences between financial and managerial accounting. This memo will also give you example of managerial accounting reports that you can expect to see in SAC. The manner in which the information contained in the reports may be used will also be explained to you.

Management accounting refers to providing and using accounting information for the purpose of decision making by managers. Management accounting helps business managers within Sparklin Automotive Company make informed decisions. For instance, the reports provided by management accounting helps the sales managers of Sparklin Automotive Company set the prices of different spark plugs. The function of management accounting is important because it helps the managers better control functions.

There are some similarities between management accounting and financial accounting. Both forms of accounting use historical data to prepare reports. For instance, the financial accountant uses historical data to produce the income statement. Similarly, the management accountant uses historical data to produce a budget for the purpose of project planning at Sparklin Automotive Company. Both financial and managerial accounting uses the currency or the dollar as the unit of measurement at Sparklin Automotive Company. In addition, you will find that most of the terminology used is the same in financial accounting and managerial accounting. For instance, cash flow is a common terminology in both financial accounting and managerial accounting. Further, there are similar techniques that are used in both financial accounting and managerial accounting. Finally, one similarity between financial accounting and managerial accounting is that the accountants in both the areas must be certified. At Sparklin Automotive Company, Beth Simpson is a Certified Management Accountant; similarly there are three persons that have Certified Public Accounting degrees in the company (Wild. J, & Shaw. K, 2009).

However, there are some differences between financial accounting and managerial accounting. The financial accounting information is used by different stakeholders including outside stakeholders like shareholders, creditors, and government agencies. On the other hand managerial accounting is meant for use only by internal managers. What is critical is that managerial accounting is confidential, private, and not disclosed to outsiders. Managerial accounting often uses forecasts and projections. Such projections have no ...

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