DQ1. What are financial accounting, management accounting, and finance? What are their similarities and differences? (Chapter 1) Accounting can be defined as a systematic recording, reporting and analysis of transaction which has a monetary value in the books. There are many accounting standards which are issued by organization of repute and which are mandatorily required to be followed while preparing the books of accounts. Accounting in general is divided mainly into two main types: these are financial accounting and also cost accounting, which is a part of managerial accounting.
DQ1. What are financial accounting, management accounting, and finance? What are their similarities and differences? (Chapter 1) Accounting can be defined as a systematic recording, reporting and analysis of transaction which has a monetary value in the books. There are many accounting standards which are issued by organization of repute and which are mandatorily required to be followed while preparing the books of accounts. Accounting in general is divided mainly into two main types: these are financial accounting and also cost accounting, which is a part of managerial accounting. Financial accounting is mainly for external purposes and consists of recording financial transactions according to generally accepted accounting principles, or GAAP and is prepared for the stakeholders of the organization. Managerial accounting is used internally for improving the company’s performance. While these two types of accounting are different in many aspects, they share several similarities. Financial Accounting The process of recording, summarizing and reporting the innumerable transactions from a business, so as to provide an accurate picture of its financial position and performance during a particular period of time. Importantly , the main objective of financial accounting is for the preparation of financial statements which includes the balance sheet, income statement and cash flow statement, statement of equity that encapsulates the company’s performance over a particular period, and financial position at a specific point in time. These statements which are generally prepared quarterly and annually, and in accordance with Generally Accepted Accounting Principles (GAAP) are aimed at external parties including investors, creditors, regulators and tax authorities Managerial Accounting It can be defined as a process of identifying, recording, measuring, analyzing, interpreting, and communicating information for the quest of an organization’s goals. …
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