accounting

Financial reporting supports users in making investment and financial decisions, serving external stakeholders like investors, creditors, customers, competitors, and regulatory bodies. It encompasses various classified financial statements such as the income statement, statement of retained earnings, balance sheet, and statement of cash flows. The strategy involves calculating end-of-period retained earnings by subtracting dividends from the sum of beginning retained earnings and net income, in compliance with GAAP/IRS regulations. It prioritizes historical data, reliability, objectivity, and an underlying basis, emphasizing specific information characteristics. On the other hand, managerial reporting aids managers in planning, directing, and controlling business operations, targeting internal users like managers, supervisors, CEOs, and CFOs. It involves the preparation of financial statements and requires careful consideration of behavioral implications, frequency, verifications, and compliance with external agencies. While external reporting focuses more on regulatory compliance, internal reporting emphasizes business unit performance and behavioral implications. It also involves segment reporting, internal audits, and aligning reports with employee behavior.