Managerial And Financial Accounting Report
Essay Preview: Managerial And Financial Accounting Report
Report this essay
Managerial and Financial Accounting Report
Accounting, like many professions has more than one type of specialty. Discussed in this paper will be the differences between financial accounting and managerial accounting. The evaluation will include the types of reports each type of accountant would generate and a comparison and contrasting of business decisions made by these different types of accountants. Because ethical considerations are paramount in any business the standards of ethical conduct for managerial accounts will be reviewed in this paper as well. Included will be the main categories of the Institute of Management Accountants (IMA) Standards of Ethical Conduct for Management Accountants in addition to examples of possible violations for each category.
Accounting is often referred to by many as the language of business. Composing the measurement, disclosure or provision of assurance about financial information primarily used by decision makers to make resource allocation decisions within companies, organizations, and public agencies are some of the functions of accounts. Managerial accounting is the branch of accounting that deals with confidential financial reports for the use of top management within an organization. Financial accounting concentrates on the production of financial reports more widely used by external users of an organization. The financial accountant will use historical data to generate reports. Future oriented reports are the focus of the managerial accountant by employing statistical methods with past data to arrive at future values (Wikipedia, 2007).
Reports generated by a managerial accountant would include a variety of reports to assist management in making decisions about the future of the company. Sales forecasting is one of these reports a managerial account may create for an entity. A sales forecasting report would be created by reviewing the sales history from any period as the basis of forecasting the quantity of goods to be purchased. Budget analysis, another managerial accountant report, would analyze the budget and assist in deciding how to distribute efficiently limited resources within the organization. Comparative analysis reports involve comparing and contrasting various topics to conclude which is best suited for the company. Another type of report a managerial account could compile would be a merger and consolidation report detailing facts and figures for possible mergers or consolidation of an entity. Reports generated by a managerial accountant are vital in assisting management of an organization to make business decisions that can affect not only the future of an organization, the effectiveness of the business, but also if that organization will survive to have a future (Salzman, 2007).
Financial accountants are concerned with the preparation of financial statements for external decision makers such as stockholders, suppliers, banks, and government agencies (Internet Center for Management and Business Administration, Inc., 2007). The internal members of an organization will also utilize this information but for public companies these reports are published for public viewing. Financial accountants are also governed by local and international accounting standards. The reports generated are required for a public organization legally. There are four main types of statements generated by a financial accountant. First is the balance sheet which reports on an organizations assets, liabilities, and net equity at any given point in time and is often referred to as the statement of financial condition. Income statements are the next type of report. Referred to commonly as the profit and loss statement, it reports on a companys results of operations over a period of time. Third is the cash flow statement. This report tells of a companys cash flow activities broken into the categories of operating, investing, and financing activities. Lastly is the statement of retained earnings which explains the changes in an entitys retained earnings over the reporting period.
The Institute of Management Accountants is an organization dedicated to the empowerment of management accounts and finance professionals to drive business performance (Institute of Management Accountants [IMA], 2006). Due to the number of public accounting scandals that occurred in the recent past ethics in accounting is a huge concern for the public (business reporter, 2002). The profession of accounting has a responsibility to provide ethical guidelines to its members (Smith & Smith, 2003). Ethics are addressed within the IMA as the Standards of Ethical Conduct for Management Accounts. The four main categories of the IMAs standards will be outlined and include competence, confidentiality, integrity, and creditability. Encouraging public confidence in the accounting profession and business products and services is the purpose of the ethical guideline. Failure for a member of the IMA to follow the standards may result in disciplinary actions. Each category will be briefly explained with examples of potential violation described.
Competence involves having the skills and knowledge to complete the assigned task and is the first on the list of standards of ethical conduct for the IMA. Not only is it important to develop the skills needed to be an accountant that knowledge must be continually maintained and be specific to the branch of accounting that one is practicing. Regulations and laws are not static. Businesses expect information provided to them to be not only accurate but timely, concise, and understandable. Part of being competent is the ability to recognize when tasks are