Question

2. Describe the main differences between the fields of financial accounting and managerial accounting. 3. Next,...

2. Describe the main differences between the fields of financial accounting and managerial accounting.

3. Next, consider the following two scenarios:

a. An investor is using financial ratios analysis to determine whether an investment should be pursued.

b. A manager is using financial ratios analysis to determine whether a product line or a segment should be discontinued, keep as is, or provided with additional investment and resources.

How are these scenarios related to the fields of financial accounting and managerial accounting? Are both related to the field of financial accounting? Are both related to the field of managerial accounting? Is one scenario more related to financial accounting and the other more related to managerial accounting? Discuss and explain your answer.

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Answer #1

Answer 2

Financial Accounting Managerial Accounting
1-It is prepared for External Parties like Shareholders,Creditors and e.t.c. 1-It is prepared for Internal parties like Management, TCWG and E.t.c.
2-In this Accounting Reporting is done for the entire Organisation. 2-In this type of Accounting Specific Area of the business can be taken into Consideration
3-It is Focus on the past performance of the Organisation. 3-It focus on the future Performance of the Organisation.
4-It has to follow the GAAP 4-There is no Specificed Principal set on which managerial account has to be done.
5-Example of financial Accounting Are prepartion of Journal, Ledger, Trail balance and financial Statements 5-Example of Managerial Accounting are analysis of Cash Flows, Ratio, Budgeting, Trend and E.t.c.

Answer 3

In this Question One Scenario is related to Fiancial Accounting and Another one is related to Managerial Accounting.

Investor Scenario is related to Financial Accounting because Investor is External Party we prepare Financial Accounts of for External Parties,Therefore, this Scenario is Related to Financial Accounting.

Manager Scenario is Related to Managerial Accounting becasue Manager is Internal Party we Prepare data of Managerial Account as per Manager for Internal Decision Making , Therefore, this Scenario is Related to Management Accounting.

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