Management Accounting and Decision Making

1. How does management accounting differ from financial accounting?

Financial accounting involves reporting the summary results of a business or organization to people outside that organization. Financial accounting must provide those strangers with a financial report that summarizes the profitability of the business, and that lists the resources and obligations of the business. Without reliably communicating the financial situation of the business, a company cannot convince strangers to invest as a result of market expansion or use the capital for other resources. Financial Accounting involves two reports called the balance sheet and the income statement. Balance sheet is a list of organization assets and liabilities and income statement, which reports how much money the company is making. The external user uses this information to thinking of loaning money to the company or investing in the company; We need a report of how much money it is making. The balance sheet and the detailed of the income statement are summary reports that are provided by businesses to people outside the company so that those people outside can decide whether it worth invest ,loan or credit the company.

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