Financial Accounting Report
Essay title: Financial Accounting Report
Though we often think of the field of accounting as a single discipline, there are, in fact, several specialties that are practiced. These include financial accounting, managerial accounting, tax accounting, cost accounting, international accounting and social accounting, among others. Of these, the former two classes of accounting are the most common. This paper will explore the key differences between financial and managerial accounting and discuss some of the standards of ethical conduct placed on management accountants by governing authorities such as the Institute of management Accountants.
Financial accounting is concerned with the recording and reporting of economic data and activities affecting the money supply of a business. Though they contain also useful information for managers, owners, investors, creditors, and the government primarily uses these reports. According to the Illinois State Board of Education, this type of accounting centers on determining what accounting records are to be maintained, how they will be maintained, and the procedures, methods, and forms to be used. Further, because these reports and statements are prepared according to generally Accepted Accounting Principles, they must reflect conditions as of a given date, the results of operations for a specific period, and the evaluation of status and results of operation in terms of established objectives (ISDE). Because it offers a historical perspective on the past performance of organizations, it is often said, “financial accounting is backward looking and sacrifices decision relevancy for objectivity” (Bromwich, 1988). This short-term external focus on reporting differentiates financial reporting from managerial reporting. Some of the financial reports used by external entities for evaluation of a business include the balance sheet, the statement of cash flows, the income statement, and the statement of owner’s equity.
“Management accounting is focused on monitoring and analyzing the effect of management decisions” (Fry, 1998). Unlike financial accounting, it includes estimated data, in addition to historical information, to aid management in conducting daily operations and planning future projects and business strategies. The subjective, future focused reports of managerial accounting are not limited by the strict guidelines of GAAP rules. In fact, the statements under this form of accounting can be tailored to the needs to the management