Compare and contrast financial and managerial accounting Essay

Compare and contrast financial and managerial accounting - Essay Example This memo outlines the differences between managerial accounting and financial accounting and the Managerial Reports and Usefulness in Decision Making. The reports presented in this memo comprise of product cost reports, budget reports, performance report, order information report and the business opportunity report. Differences between Managerial and Financial Accounting Given the fact that one of the duties of a manager is to plan; then it stipulates that management accounting has a solid emphasis on the future. On the other hand, financial accounting fundamentally gives summaries of the previous financial transactions. The summaries might be very important in the planning process, but only to a particular point. In this perspective, the future might not be a replication of the transactions that took place previously. Modifications are regularly taking place in the fiscal conditions thus the modifications call for planning which is based to a large extent on estimates of the transa ctions that will take place as opposed to the summaries of the transactions that have already taken place (Needles, Powers & Crosson, 2010). Financial accounting information is always anticipated to b verifiable and objective. Nonetheless, for internal purpose the manager demands data that is significant even if it is not totally verifiable or objective. By virtue of relevance, it implies that appropriate for the challenge at hand. For instance, it is hard to ascertain that estimated volume of sales for a proposed expansion of business into the foreign country but this is precisely the kind of data that is prevalently useful to managers in the process of decision making. On the other hand management accounting information system must be adequately elastic to give any kind of information that is appropriate for any specific decision (Teale, 2003). Managerial Reports and Usefulness in Decision Making There are various managerial reports which are used in making important decisions in business. Such reports comprise of cost reports, Performance reports, budget reports, business opportunity reports and order reports. These types of reports have various uses in decision making process. Cost Reports Management accounting makes calculations of the cost of goods and services being produced. This is possible through accumulation of costs of raw products, costs of overheads, labor costs and any other extra costs that might be put into consideration. The entire costs are then divided by the quantity of the products produced where the information is put into a cost report. Cost reports are significant methods for firms to adapt or learn which areas of a business are potentially profitable and areas that costs more money. When cost reports are made prior to the beginning of a project, they give an efficient estimate of the likely cost of a project thus allowing the manager to plan and estimate the profit margin. Whenever the cost reports are made after the project has been finalized one can get a better insight of the maximum costs and the profit expected from the project. Use of the Report This type of report gives the managers the ability to see the constituent cost prices of products against the selling prices thus enabling them to determine the profit margin. Efficient cost reports gives quality information to enable managers see the significance