Compare and Contrast Financial and Managerial Accounting
Overview
This paper compares and contrasts financial accounting and managerial accounting, examining their distinct objectives and applications within organizations. It analyzes the importance of managerial accounting to managers, demonstrating how it supports strategic planning, decentralization of decision-making, and data analysis through practical examples such as Nike Company.
What this essay covers
- Definition and objectives of financial accounting versus managerial accounting
- The importance of managerial accounting to managers and organizational growth
- Managerial accounting applications including planning, decentralization, and data modification
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Compare and Contrast Financial and Managerial Accounting
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Compare and Contrast Financial and Managerial Accounting
Financial accounting is a discipline in the accounting field that embarks in recording and reporting transactions in an enterprise. Financial accounting's objectives are to keep financial records necessary for the preparation of income statements and balance sheets (Deegan, 2013). Additionally, it also helps in evaluating performance in a company for a particular period. On the contrary managerial accounting is the practice of measuring, interpreting, and analyzing financial information to help executives or managers strategize on ways of meeting the needs of an organization (Braun, Beaubien & Tietz, 2017). Financial accounting typically indulges in providing relevant information for financial statement preparation, while managerial accounting helps in an organization's internal management.
The Importance of Managerial Accounting to Managers
Managerial accounting plays an integral role in the growth and success of the organization. It can be used for both short-term or long-term needs to improve the performance of an organization. Managerial accounting serves managers in diversified ways; for example, it helps make outstanding decisions that directly impact the growth of an enterprise (Deegan, 2013). For example, Nike Company will incorporate managerial accounting to enable growth and increase sales volume. Nike is a complex organization, and it has branches all over the world which supply retailers and wholesalers with Nike merchandise.
Firstly, the company uses managerial accounting for planning. Managerial planning helps an organization to plan on how to achieve both short-term and long-term goals.