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Lesson 1. Introduction

Management accounting is focused on accumulating and preparing financial reports for internal users to assist with planning, controlling, and evaluating operations. In contrast, financial accounting is primarily concerned with recording transactions and preparing financial statements for internal and external users according to GAAP. Management accounting provides subjective, relevant, and future-oriented reports like budgets and performance evaluations as needed by managers, while financial accounting provides objective, reliable information about the company as a whole on a periodic basis. Both forms of accounting must be practiced ethically to avoid scandals like those at Enron and WorldCom.

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29 views

Lesson 1. Introduction

Management accounting is focused on accumulating and preparing financial reports for internal users to assist with planning, controlling, and evaluating operations. In contrast, financial accounting is primarily concerned with recording transactions and preparing financial statements for internal and external users according to GAAP. Management accounting provides subjective, relevant, and future-oriented reports like budgets and performance evaluations as needed by managers, while financial accounting provides objective, reliable information about the company as a whole on a periodic basis. Both forms of accounting must be practiced ethically to avoid scandals like those at Enron and WorldCom.

Uploaded by

Ella Marie Wico
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MANAGEMENT

ACCOUNTING

What is
Management
Accounting?

Management Accounting

Accumulation and preparation of


financial reports for internal users only
Needed by management in planning,
controlling and evaluating the entitys
operations

Financial Accounting

Primarily concerned with the recording


of business transactions and the
eventual preparation of financial
statements
Intended for internal and external users

Management
Accounting
vs
Financial
Accounting

Managerial

Financial

User perspective

Internal parties

External parties

Types of reports

Budgets,
performance
evaluations and
cost reports

Financial
statements
according to GAAP

Nature of
information

Subjective, relevant,
future oriented

Objective, reliable,
historical

Frequency of
reporting

As needed

Periodically

Level of detail

Decision making
level

Company as a
whole

Ethical & Social


Responsibilities

Ethical & Social Responsibilities

Ethics involve distinguishing what is


right from what is wrong what
should and should not be done.

Enron

WorldCom

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