Financial Accounting and Managerial Accounting Systems

m adepttary line of work concern relationship and Managerial Accounting SystemsExecutive drumheadThough, pecuniary account statement and managerial accountancy establishments prep be and analyze the same fiscal data, they in corresponding manner differ in some aspects. For example the delectationrs of the education argon different. as well the procedures for their preparations differ including the time frames. greet score is a nonher(prenominal) sphere of be that deals with the analysis of equals of products and activities in an brass. It forms a genuine part of managerial method of score since through it, the focus thunder mug also make decisions. This paper analyzes the similarities a swell as differences amongst the deuce. creative activity counseling write up is and accounting arranging that leaves the everyplacesight with techniques that provide of an modulateing body with schooling for purposes of internal engross like decision making an d rough-and-ready incorporate of the organizations resources. According to Enotes website (2010), procedures in counseling accounting provide teaching for decision makers in a company. Contrary, financial accounting procedures provide cultivation to external users like the sh arholders of a firm, government agencies, and creditors to the firm. Management accounting reports be usually translated anytime daily, weekly, monthly, or quarterly. While individuals in an organization decide trouble accounting methods, financial accounting techniques must conform to external standards like the international financial accounting standards developed by financial accounting standards board (FASB). Cost accounting is often conf utilize with attention accounting. Cost accounting involves find out the court of an activity while caution accounting goes beyond to combine multiple commission disciplines that contain financial learning for internal decision making. Therefore greet acco unting can be said to a necessary comp cardinalnt of anxiety accounting (Enotes website, 2010).Characteristics of instruction accounting proceduresAccording to netTOM website (2010), management accounting procedures should posses the following procedures. They should be relevant for the purpose, complete, accurate, clear and precise to the manager, timely, communicated through the appropriate channel, less costly to provide and the volume should be manage equal to(p).The role of management accountingManagement accounting plays the following roles within an organizationPlanningthe information provided by management accounting procedures is vital in provision and budgeting processes. This is because such information contains miscellaneous costs like pricing, product costs and capital expenditures.Controlthe management is in a position to see which activities argon not conforming to the plan from the reports provided by the management accounting (netTOM website, 2010).Organizatio nthe management accountant can reinforce the organizational framework of the organization by tailor the accounting structure to the organizational structure.Motivationthe managers and other staff are always motivated by the budgets prepared by the management accountant. purpose makingthis is one of the major functions of management accounting procedures. Through the entreaty and analysis of data, the reports he or she presents to the managers assist in decision making (netTOM website, 2010).Similarities between financial accounting and management accountingDespite the twain fields having numerous differences, there also many areas of similarities as specify belowCertification both fields emphasize on certification. For one to be certified, he/she must pass the exams that are concerned in each field of specialization. Certifications come in form of certified management accounting and certified public accounting (Ehoh website, 2010).Review of historic data both systems prepare rep orts basing on historical data review. In financial accounting, this is for comparison purposes of the backup between the present and the past, while for management accounting, it is for find out the current performance of the organization and to come up with a commercial enterprise financial forecast of the succeeding(a) (ehow website, 2010).Measurement of the currency the unit of measure in generation of reports in the both systems is the currency. The reports generated are thereafter used to give tangible information to line of work owners or show the financial state of the business. They can also be used to plan and generate the budget for the business (ehow website, 2010).Terminology used both systems of accounting use similar accounting terminology. E.g. debits and credits are used in both systems to describe the money that goes out and the money that go in to the business respectively (ehow website, 2010).Techniques the accounting techniques employed by both the systems are essentially the same. E.g. the technique that is used to determine the actual cost of the product (ehow website, 2010).Differences between financial and managerial accountingAlthough both financial accounting and management accounting provide information to the user for decision making, there are various differences between the two as summarized in the table below.fiscal accountingManagement accountingInformation from Financial accounting system is used by external parties to the organization like the creditors, shareholders etcInformation from management accounting procedures is for internal use by the organizational management.Financial accounting reports provide information on financial performance of an organization over a given spot of time and the state of affairs for the organization at the end of the period.Management accounting reports are for planning and control activities and also for decision making in an organization.It is compulsory according to the uprightne ss for limited companies to prepare financial statements.Management accounting reports have no legal requirement.Financial accounting statements are an end to themselves as they worry mainly on the whole organization aggregating costs and revenues from different departments.Management accounting information can not be an end to a product but rather aid in decision making. Also management accounting may give focus to specific areas and not every department.Essentially, a historical picture of a past effect is presented by financial accounting procedures.In management accounting, both the historical past of the immediate past and a future marionette for planning is given.Financial accounting records should be provided for at least a period of 12 months.There is no time limit for management accounting records.The international accounting standards must be followed in the preparation of accounting statement (financial accounts of various companies can be compared). I.e. Generally acc epted Accounting Principles must be followed (GAAP).There are no strict rules to govern management accounting record preparation (no train to follow GAAP). The records are used by managers of the organization and therefore there is no need for comparison.A specific format specified by the IAS is to be followed in the preparation for financial statements.There is no specified management accounting format and therefore no specific statements should be produced.The nature of financial statements most often is of financial nature.Management accounting information not necessarily money related. It can also be non-monetary.(NetTOM website, 2010)Types of management accounting reportsSince management accounting is a vital part of the planning tool kit, you can find the following managerial reports within SAC division analysisthis usually determines the standard, swellings and actual costs of an activity. One key element to the companys benchmark is the difference between the actual and t he standard costs, i.e. how much it can cost to produce the same computer chip by two different computer manufacturers. The organization can analyze its planning processes victimization the projections or estimate variance analysis. Through variance analysis, there is a special field called bottleneck accounting that examines the relative costs and the variances created through production bottlenecks (lovetoknow website, 2010).Cost analysisthis is a type of managerial accounting that analyzes the exact cost of a product. This usually starts with finding out the cost of straight off expenses like materials and labor. There are other sophisticated management accounting techniques that include analysis of indirect expenses. They include cost projection accounting, calculating opportunity costs and facility overheads. These techniques essentially analyze resource ways in which the company could have invested the funds (lovetoknow website, 2010).Activity establish costingthis type of c osting technique analyzes the cost of activities basing on their cost rather than the product. Its advantage is that it allows for deeper analysis of the companys interconnected parts. This method divides products intoUnit- level activities (production of one unit).Batch level activities (cost per batch).Product sustaining activities.Facility sustaining activities.The above report insinuates linguistic rule Costing System Per Unite Costs Retrieved from http//ivythesis.typepad.com/term_paper_topics/management_accounting_report/Accounting reports prepared on profit performance for a company may also indicate some of the expected managerial accounting duties. The example below was careworn from ABC System Profit Performance. The example that follows indicates normal costing system profit performance.ABC System Profit Performance report retrieved from http//ivythesis.typepad.com/term_paper_topics/management_accounting_report/ formula Costing System Profit Performance report retrieved from http//ivythesis.typepad.com/term_paper_topics/management_accounting_report/A business process like research development can be examined by either total cost analysis and/or cycle cost analysis. This is because both methods analyze the total expenses involved in a business activity. Therefore the two methods are very important n determining the companys profitability (lovetoknow website, 2010).Return on investment this is a type of cost analysis that includes cost analysis naturally while measuring the direct returns as well as calculating the ratio (lovetoknow website, 2010).Projections this include future estimate of the organization such as demand, sales, expenses, necessary resources and the number of undeniable employees. Projections form one of the most complicated areas of managerial accounting because of the problem ion predictions caused by inflation, consumer demand and material prices. Therefore, they are built on spacious modeling.Balanced scorecard this usually includes standard financial measures. These measures include on perspectives of the customer on satisfaction, business process, innovation and perspective on study (lovetoknow website, 2010).Digital dashboards these are applications that are designed in the form of a cars dashboard to display critical business information. They provide needed information fat just at a glance. Through them, the manager is able to see the latest data about the company in the companys business contexts (lovetoknow website, 2010).ConclusionManagement accounting and financial accounting are two major accounting systems used by various organizations. Despite their use, they are totally different. Whereas financial accounting is prepared after a real period of time and used by external users, managerial accounting is prepared by the management accountant for internal use of the management and it has no specific format to be used hence no need for comparison with other organizations. The similarities of t he two range from mandatory certifications, use of currency, terminology used to similar technology. Examples of managerial accounting reports available are the variance analysis, cost analysis, return on investment, projections and digital dash boards.ReferencesEhow website, 2010 Similarities of Financial and Managerial Accounting. Retrieved on February 15, 2010 from http//www.ehow.com/about_4853367_similarities-financial-managerial-accounting.htmlEnotes website, (2010). Managerial Accounting. Retrieved on February 15, 2010 from http//www.enotes.com/biz-encyclopedia/managerial-accountingLovetoknow website. (2010). Managerial Accounting. Retrieved on February 15, 2010 from http//business.lovetoknow.com/wiki/Managerial_AccountingNetTOM website. (2010). Financial and Management Accounting. Retrieved on February 15, 2010 from http//cbdd.wsu.edu/kewlcontent/cdoutput/TOM505/page11.htm