The major distinction between financial and management accounting is the users of the information.
Financial accounting serves external users, such as investors, creditors, and suppliers.
Management accounting serves internal users, such as top executives, management, and administrators within organizations.
The primary questions about an organization’s success that decision makers want to know are:
What is the financial picture of the organization on a given day?
How well did the organization do during a given period?
Accountants answer these primary questions with three major financial statements.
Balance sheet – shows financial picture on a given day
Income statement – shows performance over a given period
Statement of cash flows – shows performance over a given period
Annual report - a document prepared by management and distributed to current and potential investors to inform them about the company’s past performance and future prospects
The annual report is one of the most common sources of financial information used by investors and managers.
Some investors purchase stock directly from the corporation (as in the previous discussion).
The company records cash received and records the par value and paid-in capital in excess of par.
Usually, stock transactions involve two or more individuals.
In that case, the corporation does not record anything except the change in ownership.
Financial accounting serves external users, such as investors, creditors, and suppliers.
Management accounting serves internal users, such as top executives, management, and administrators within organizations.
The primary questions about an organization’s success that decision makers want to know are:
What is the financial picture of the organization on a given day?
How well did the organization do during a given period?
Accountants answer these primary questions with three major financial statements.
Balance sheet – shows financial picture on a given day
Income statement – shows performance over a given period
Statement of cash flows – shows performance over a given period
Annual report - a document prepared by management and distributed to current and potential investors to inform them about the company’s past performance and future prospects
The annual report is one of the most common sources of financial information used by investors and managers.
Some investors purchase stock directly from the corporation (as in the previous discussion).
The company records cash received and records the par value and paid-in capital in excess of par.
Usually, stock transactions involve two or more individuals.
In that case, the corporation does not record anything except the change in ownership.
