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.
- 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.
- Financial accounting must follow generally accepted accounting principles (GAAP), while managerial accounting does not need to follow GAAP.
- 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.