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Role Of Financial And Managerial Accounting Essay

Financial accounting pertains the preparation of an organization’s financial statements. The role of financial accounting therefore is to come up with information that can help the users of financial statements in making decisions. Some of these users include employees, shareholders, suppliers and financial Institutions. Managerial accounting on the other hand aims at providing information that is u7sed by managers in the planning and controlling functions of the organization.

In an organization therefore, financial accounting plays the role of analyzing and presenting information in a manner that can be understood and interpreted by all. It also ensures that such information is presented by adhering to the International Financial reporting Standards. Financial accountants prepare financial reports that reflect on the company’s performance over time. These include the profit and loss account, the balance sheet and the cash flow statements. Such information is also useful to bodies like the tax authorities.

Financial accounting helps top managers to effectively manage their organizations. This is through the regular financial information that comes out of this function. Management accounting enables policy formulation and implementation to take place with ease. It is the managent information that is used to plan and control the organization’s operations. Management accounting, unlike financial

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accounting presents the accounting information in terms of tables, charts, graphs and other forms that management uses to make decisions.

Presentation of information in such a manner not only gives the firm’s internal performance analysis but also a comparison with the industrial average. Financial accounting differs from managerial accounting in that financial accounting produces information that is used by the organization and public at large. Managerial accounting on the other hand produces information that is used within the organization only. Whereas managerial accounting reports are confidential, those for financial accounting are open to all the stakeholders.

Financial accounting reports in form of income statements and cash flow statements follow a specific format. Managerial accounting reports differ from one organization to the other. Finally, financial accounting reports on historical/past information. Management accounting on the other hand reports on both the historical information, present as well as on how the future of the organization can be planned.


1. B. E. Needles; Financial Accounting; Houghton Mifflin,1995 2. Thomas Edmond; Fundamental Financial Accounting Concepts; Mc Graw Hill pub, 1999 3. Cecily Raiborn; Managerial Accounting; West Pub co,1995

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