{"id":176,"date":"2018-04-16T21:26:05","date_gmt":"2018-04-16T21:26:05","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=176"},"modified":"2024-04-29T16:46:10","modified_gmt":"2024-04-29T16:46:10","slug":"differentiating-between-financial-and-managerial-accounting","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/differentiating-between-financial-and-managerial-accounting\/","title":{"raw":"Differentiating Between Financial and Managerial Accounting","rendered":"Differentiating Between Financial and Managerial Accounting"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Compare and contrast financial accounting and managerial accounting<\/li>\r\n<\/ul>\r\n<\/div>\r\nThere will be <strong>no<\/strong> numbers to crunch in this module <strong>at all<\/strong>! That sounds kind of odd in an accounting course, doesn\u2019t it? Well, let\u2019s first watch Tony discuss what managerial accounting is:\r\n\r\n<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=4306747&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=573&amp;video_id=2eG_UVdoJrA&amp;video_target=tpm-plugin-vfzq3809-2eG_UVdoJrA\" width=\"800px\" height=\"500px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe>\r\n\r\nYou can\u00a0<a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/MAModule1Video1IntrotoManagerialAccounting_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video \u201cMA Module 1, Video 1, Intro to Managerial Accounting\" here<\/a>.\r\n\r\nNow, with that information, how is managerial accounting <strong>different<\/strong> from financial accounting? Well, if you remember from the first modules in this course, financial accounting focuses on recording transactions as they occur. So, for example, when you buy something, you record the payable, then you pay the bill. Another example might be, you provided services for a customer. You invoice the customer, await payment, and then deposit the check when it arrives. So essentially, you are recording activities in a historical way. They have happened already.\r\n\r\nNow, another big difference is that financial accounting is done for people outside of the company. A bank may want to see your financial statements in order to lend you money. A vendor may want to see your financial statements to extend you credit. The IRS also needs your financial information to access taxes when you file your tax return.\r\n\r\nManagerial accounting on the other hand, is done to provide information to managers within the organization. It is used for planning, controlling and decision making. Companies are not required to do the tasks of managerial accounting. \u00a0You can also do reporting in a segment type of system. This means looking at just one product, one manufacturing line or one segment of your service. These reports don\u2019t need to cover the entire operation of the business, and they do not need to follow generally accepted accounting principles (GAAP). You can prepare your reports from a managerial accounting perspective in whatever way is helpful for decision making.\r\n\r\n<iframe marginwidth='0px' marginheight='0px' width='800px' height='500px' frameBorder='0' src='\/\/plugin.3playmedia.com\/show?mf=4306748&p3sdk_version=1.10.1&p=20361&pt=573&video_id=Qo9dd7lH3WM&video_target=tpm-plugin-qah2prpu-Qo9dd7lH3WM'><\/iframe>\r\n\r\nYou can <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/MAModule1Video4ManagerialvsFinancialAccountingProblem1-1_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video \"MA Module 1, Video 4, Managerial vs Financial Accounting, Problem 1-1\" here.<\/a>\r\n<div class=\"textbox exercises\">\r\n<h3>Summary<\/h3>\r\nSo here is the basic overview of how financial accounting differs from managerial accounting.\r\n\r\nIn small companies, one accountant may be responsible for financial and managerial accounting processes, while larger companies will have multiple people in each role. \u00a0Because managerial reporting is not required, it can sometimes get put on the back burner at smaller companies who don\u2019t see the importance. As you will see in further modules, the importance of managerial accounting can\u2019t be overstated. Planning and decision making are important in the long term profitability of the company!\r\n\r\n<\/div>\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/3bc95ca5-4551-4d58-b44f-d2ddc213071d\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Compare and contrast financial accounting and managerial accounting<\/li>\n<\/ul>\n<\/div>\n<p>There will be <strong>no<\/strong> numbers to crunch in this module <strong>at all<\/strong>! That sounds kind of odd in an accounting course, doesn\u2019t it? Well, let\u2019s first watch Tony discuss what managerial accounting is:<\/p>\n<p><iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=4306747&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=573&amp;video_id=2eG_UVdoJrA&amp;video_target=tpm-plugin-vfzq3809-2eG_UVdoJrA\" width=\"800px\" height=\"500px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\"><\/iframe><\/p>\n<p>You can\u00a0<a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/MAModule1Video1IntrotoManagerialAccounting_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video \u201cMA Module 1, Video 1, Intro to Managerial Accounting&#8221; here<\/a>.<\/p>\n<p>Now, with that information, how is managerial accounting <strong>different<\/strong> from financial accounting? Well, if you remember from the first modules in this course, financial accounting focuses on recording transactions as they occur. So, for example, when you buy something, you record the payable, then you pay the bill. Another example might be, you provided services for a customer. You invoice the customer, await payment, and then deposit the check when it arrives. So essentially, you are recording activities in a historical way. They have happened already.<\/p>\n<p>Now, another big difference is that financial accounting is done for people outside of the company. A bank may want to see your financial statements in order to lend you money. A vendor may want to see your financial statements to extend you credit. The IRS also needs your financial information to access taxes when you file your tax return.<\/p>\n<p>Managerial accounting on the other hand, is done to provide information to managers within the organization. It is used for planning, controlling and decision making. Companies are not required to do the tasks of managerial accounting. \u00a0You can also do reporting in a segment type of system. This means looking at just one product, one manufacturing line or one segment of your service. These reports don\u2019t need to cover the entire operation of the business, and they do not need to follow generally accepted accounting principles (GAAP). You can prepare your reports from a managerial accounting perspective in whatever way is helpful for decision making.<\/p>\n<p><iframe loading=\"lazy\" marginwidth=\"0px\" marginheight=\"0px\" width=\"800px\" height=\"500px\" frameborder=\"0\" src=\"\/\/plugin.3playmedia.com\/show?mf=4306748&#38;p3sdk_version=1.10.1&#38;p=20361&#38;pt=573&#38;video_id=Qo9dd7lH3WM&#38;video_target=tpm-plugin-qah2prpu-Qo9dd7lH3WM\"><\/iframe><\/p>\n<p>You can <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Accounting+for+Managers\/Transcriptions\/MAModule1Video4ManagerialvsFinancialAccountingProblem1-1_transcript.txt\" target=\"_blank\" rel=\"noopener\">download a transcript for the video &#8220;MA Module 1, Video 4, Managerial vs Financial Accounting, Problem 1-1&#8221; here.<\/a><\/p>\n<div class=\"textbox exercises\">\n<h3>Summary<\/h3>\n<p>So here is the basic overview of how financial accounting differs from managerial accounting.<\/p>\n<p>In small companies, one accountant may be responsible for financial and managerial accounting processes, while larger companies will have multiple people in each role. \u00a0Because managerial reporting is not required, it can sometimes get put on the back burner at smaller companies who don\u2019t see the importance. As you will see in further modules, the importance of managerial accounting can\u2019t be overstated. Planning and decision making are important in the long term profitability of the company!<\/p>\n<\/div>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_3bc95ca5-4551-4d58-b44f-d2ddc213071d\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/3bc95ca5-4551-4d58-b44f-d2ddc213071d?iframe_resize_id=assessment_practice_id_3bc95ca5-4551-4d58-b44f-d2ddc213071d\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-176\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Differentiating Between Financial and Managerial Accounting. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>MA Module 1, Video 1, Intro to Managerial Accounting. <strong>Authored by<\/strong>: Tony Bell. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=2eG_UVdoJrA&#038;feature=youtu.be\">https:\/\/www.youtube.com\/watch?v=2eG_UVdoJrA&#038;feature=youtu.be<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><li>MA Module 1, Video 4, Managerial vs Financial Accounting, Problem 1-1. <strong>Authored by<\/strong>: Tony Bell. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=Qo9dd7lH3WM&#038;feature=youtu.be\">https:\/\/www.youtube.com\/watch?v=Qo9dd7lH3WM&#038;feature=youtu.be<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":3,"template":"","meta":{"_candela_citation":"[{\"type\":\"copyrighted_video\",\"description\":\"MA Module 1, Video 1, Intro to Managerial Accounting\",\"author\":\"Tony Bell\",\"organization\":\"\",\"url\":\"https:\/\/www.youtube.com\/watch?v=2eG_UVdoJrA&feature=youtu.be\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"copyrighted_video\",\"description\":\"MA Module 1, Video 4, Managerial vs Financial Accounting, Problem 1-1\",\"author\":\"Tony Bell\",\"organization\":\"\",\"url\":\"https:\/\/www.youtube.com\/watch?v=Qo9dd7lH3WM&feature=youtu.be\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"original\",\"description\":\"Differentiating Between Financial and Managerial Accounting\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"47b5a508-3838-4cf8-86d9-039040fa0548, 07dc7e77-d5d9-4848-bb89-18da3e34e18b","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-176","chapter","type-chapter","status-publish","hentry"],"part":104,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":14,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/176\/revisions"}],"predecessor-version":[{"id":4048,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/176\/revisions\/4048"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/104"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/176\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=176"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=176"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=176"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}