Financial Managerial Accounting

In simple terms, managerial accounting exists to help managers make internal decisions that affect an organization, whereas financial accounting exists mostly to present financial information about an organization to outside sources.

Managerial Accounting

Managerial accounting relies heavily on forecasts, trends and other future considerations and usually does not allow for exact figures to be generated. Managers use these figures to facilitate the day-to-day activities of an organization and to make operational decisions. Because markets and business activities constantly change, leaders must use managerial accounting to estimate an organization's current position and make sound decisions. There often is little time for managers to consider exact numbers. Reports generated from managerial accounting activities follow no formal principles or guidelines, and they can be used however an organization desires.

Financial Accounting

Alternately, financial accounting makes use of exact figures during a specific period of time. Reports generated from this type of accounting must be in line with generally accepted accounting principles (GAAP). Leaders use these reports to present the overall financial health of an organization to outside sources such as stakeholders, potential investors, financial institutions, its board of directors, and more. Financial accounting reports also must be filed with the appropriate governing agencies each year.