Financial accounting entails looking business transactions of a given entity by the use of financial statements, this involves recording transactions as they occur, preparing briefs and reporting. For example, in a health care setting financial accountants will be interested in preparing books of accounts of the facility like income statements, balance sheet and statements of cash flows.
This is majorly information that the external users want. For example, suppliers of hospital equipment’s and consumables would like to know the cash or debt position of the facility. So that they can make wise decision while delivering goods with expectations to be paid latter. This can help suppliers in avoiding bad debts in their income statements (Saylor, nd)
Several factors differentiate financial accounting from managerial accounting. One, whereas financial accounting is meant to provide financial information of a given company to the external users like stakeholders, managerial accounting provides its information to the internal users like departmental heads who may need the accounting information in their decision making.
Several factors differentiate financial accounting from managerial accounting. One, whereas financial accounting is meant to provide financial information of a given company to the external users like stakeholders, managerial accounting provides its information to the internal users like departmental heads who may need the accounting information in their decision making.
Two, financial accounting follows the GAAP rules, but, managerial accounting does not adhere to those rules. If the latter dares to follows GAAP, those rules can be inhibit gathering of information that can be useful in internal decision making process.
Lastly, financial accounting is historical in nature, that is, it uses the available information (entity achievements), but, managerial accounting is more of projections. The latter majors on what the entity wants to achieve (Saylor, nd).
