Chapter 15
Managerial accounting → provides information for the internal users
- Managerial accounting includes the following:
- Historical data, which provide objective measures of past operations
- Estimated data, which provide subjective estimates about future decisions
Financial accounting → provides information for the external users
Objective: Information based on facts
Subjective: Information based on personal experience / personal opinion
Internal users
- Management
- Employees
External users
- Shareholders
- Creditors
- Government agencies
- The general public
Financial statements
Statement of cash flow, balance sheet, retained earnings statement, income statement
Managerial accounting reports
Production report, activity analysis, budget report
Financial statements Managerial accounting reports
Users of information External users and company management Management
Nature of information Objective Objective and subjective
Guidelines for preparation Prepared according to GAAP Prepared according to management needs
Timeliness of reporting Prepared at fixed intervals Prepared at fixed intervals and on an as-
needed basis
Focus of reporting Company as a whole Company as a whole or segment
Unlike financial statements prepared in financial accounting, managerial accounting reports do not
always have to be:
- Prepared according to generally accepted accounting principles (GAAP) this is because only
one company uses the information.
- Prepared for the business as a whole. Most management reports are prepared for products,
projects, sale territories, or other segments of the company.
Organization chart
The operating structure of a company can be shown in an organization chart
Line responsibilities
A line department is directly involved in providing goods or service to customers
Staff responsibilities
A staff department providers services, assistance, and advice to the departments with line
responsibilities
Managerial accounting → provides information for the internal users
- Managerial accounting includes the following:
- Historical data, which provide objective measures of past operations
- Estimated data, which provide subjective estimates about future decisions
Financial accounting → provides information for the external users
Objective: Information based on facts
Subjective: Information based on personal experience / personal opinion
Internal users
- Management
- Employees
External users
- Shareholders
- Creditors
- Government agencies
- The general public
Financial statements
Statement of cash flow, balance sheet, retained earnings statement, income statement
Managerial accounting reports
Production report, activity analysis, budget report
Financial statements Managerial accounting reports
Users of information External users and company management Management
Nature of information Objective Objective and subjective
Guidelines for preparation Prepared according to GAAP Prepared according to management needs
Timeliness of reporting Prepared at fixed intervals Prepared at fixed intervals and on an as-
needed basis
Focus of reporting Company as a whole Company as a whole or segment
Unlike financial statements prepared in financial accounting, managerial accounting reports do not
always have to be:
- Prepared according to generally accepted accounting principles (GAAP) this is because only
one company uses the information.
- Prepared for the business as a whole. Most management reports are prepared for products,
projects, sale territories, or other segments of the company.
Organization chart
The operating structure of a company can be shown in an organization chart
Line responsibilities
A line department is directly involved in providing goods or service to customers
Staff responsibilities
A staff department providers services, assistance, and advice to the departments with line
responsibilities
