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Financial vs managerial accounting. What about GAAP?

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What are the differences between financial and managerial accounting? Why does financial accounting have to comply with GAAP but managerial does not? What types of decisions can be made using financial accounting information? What types of decisions can be made using managerial accounting? Explain and/or give an example

What is the purpose of financial statement analysis? What are some of the tools that we can use to analyze financial performance? What should one use to benchmark performance? Why?

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Solution Summary

The 717 word solution contains a good definition and description of the differences in financial and managerial accounting. There are numerous examples for the types of decision-making information available in both. The questions about financial analysis, tools and benchmarking are each explained and examples are provided from websites.

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What are the differences between financial and managerial accounting?

Financial accounting is that which is prepared for stakeholders: shareholders, banks, potential investors, SEC, etc. It is a report on the past results that outsiders want to see. Managerial accounting is for internal use only. It is more of a current analysis of operations, and assigning of costs. It is usually important for the purpose of analyzing operations to try to do it better. One of the more important parts of managerial accounting is the discussion about the assignment of costs: are they variable, semi, or fixed, and how are costs allocated to which products.

Why does financial accounting have to comply with GAAP but managerial does not?

Because financial accounting is published to stakeholders, it is important that common standards apply to the data. If the standards weren't imposed on financial data, how could a stakeholder compare your company to other similar companies? A potential investor trying to decide which company to invest in could only make a reasonable decision if the rules of the game were the same for ...

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