Question

Managerial accounting differs from financial accounting in several areas. Specify whether each of the following characteristics relates to managerial accounting or financial accounting.
a. Reports are usually prepared quarterly and annually.
b. Information is verified by external auditors.
c. Focus is on the past.
d. Main characteristic of information is that it must be relevant.
e. Reports tend to be prepared for the parts of the organization rather than the whole organization.
f. Primary users are internal (i.e., company managers).
g. It is governed by Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
h. The primary characteristics of information are that it must be reliable and objective.
i. Reports are prepared as needed.
j. It is not governed by legal requirements.
k. Primary users are external (i.e., creditors, investors).
l. Focus is on the future.
m. Reporting is based mainly on the company as a whole.

Answer 1

The information given is differentiated into either managerial accounting or financial accounting below:

• Main characteristic of data is that it must be reliable and objective = Financial accounting.

• Not governed by legal requirements = Managerial accounting
• Primary users are external (i.e creditors, investors) = Financial accounting
• Focused on the future = Managerial accounting

• Reporting is based mainly on the company as a whole= Financial accounting
• Reports are usually prepared quarterly and annually= Financial accounting
• Information is verified by external auditors = Financial accounting
• Focused on the past = Financial accounting

What is managerial accounting?

Managerial accounting is a method of accounting that creates statements, reports, and documents that help management in making better decisions.

Financial accounting is concerned with the summary, analysis and reporting of financial transactions related to a business.

Learn more about managerial accounting on:

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