What you’ll learn to do: Describe the difference between financial and managerial accounting

What are the differences between financial accounting and managerial accounting? Let’s take a look at some of the primary differences.

1. Financial accounting is concerned with reporting historical data to outside sources, while managerial accounting is concerned with reporting data to inside sources for the purpose of planning.
2. Financial accounting must follow generally accepted accounting principles (GAAP), while managerial accounting does not need to follow GAAP.
3. Financial accounting is mandatory, while managerial accounting is not.

There are other differences which we will discuss in this module. Even though managerial accounting is not required, it is a very important component of successful business planning.