Sally Jones, New Assistant Tony Billan, Chief Essay

Length: 5 pages Sources: 3 Subject: Business - Management Type: Essay Paper: #86682982 Related Topics: Managerial Accounting, Stocks And Bonds, Tactical Planning, Preparing
Excerpt from Essay :

¶ … Sally Jones, New Assistant

Tony Billan, Chief Accountant

Similarities and Differences between Financial and Managerial Accounting.

I am writing you this MEMO to provide the similarities and differences between financial and managerial accountings. Identification of the similarities and differences between the two concepts is very important to enhance your greater understanding on the importance of managerial accounting, managerial reports, and their usefulness in making importance decisions within the Sparklin Automotive Company (SAC).

The objective of this MEMO is to identify the major similarities and differences between financial and managerial accounting. In a contemporary business environment, both financial and managerial accountings are important tools for business. Although, both concepts employ the same financial data, nevertheless, they serve different purposes. Differences between financial and management accountings could be identified from the different roles they perform.

II. Differences Between Managerial and Financial Accounting

Financial accounting report is prepared to reveal the financial health of an organization. Financial accounting is prepared for the use of the external stakeholders such as investors, creditors and other entities outside the business. Since external users do not have access to the internal information, they always rely on the standardized financial data presented by the organization. Contrarily, managerial accounting report is prepared for the use of managers, executive and employees within the organization. For example, to forecast the market trends, management heavily relies on managerial accounting. (Walther, 2010). Internal users such as management and employee need information to control and plan the business operations since the high-level management rely on financial data to make decision. While managerial accounting report assists the executive to make decision, the financial accounting helps the investors or other external entities to decide on whether to purchase stock or bonds security of an organization. (See Table 1). (McGraw-Hill Higher Education, 2008).

Although, both financial and managerial accounting rely on the same underlying financial data to make decision, however financial accounting report presents the past financial data of the organization to enable external entities to evaluate the organizational performances. On the other hand, managerial accounting lays emphasis on the past, current and future trends for the business decision. While managerial accounting report helps manager to make decision on the day-to-day business operations, the managers may not rely on the exact numbers because managers need to make swift decision in a strong competitive and fluctuating environment. Typically, financial accounting does not provide enough detail to assist managers to make internal decision, contrarily, the managerial accounting report assists managers to forecast for future planning, controlling, and accomplish decision-making. (University of North Carolina, 2010).

Table 1: Comparative Features of Managerial and Financial Accounting Information

Source: McGraw-Hill Higher Education, (2008).

Since decision-making is essential for the survival of an organization, management report is very critical in the decision making process.

III. Managerial Reports and usefulness in Decision Making

In the present competitive environment, decision-making is very essential for the survival and performances of an organization. Decision-making is defined as choosing the best from the alternatives. The task of management is to identify and make the best decision for an organizational growth. For management to make effective decision that will have direct impact for an organization, management requires relevant information. Managerial report is concerned with providing information for the support of the internal management process. The management report is concerned with the issue relating to the importance of the organization, and it could be presented in written or verbal form. However, matters of importance relating to an organization are always presented in written form. The management report is always presented in the following format:

Issue: stating the subject of the report.

Background: states the reason investing in the issue.

Alternatives: identify the available alternatives and the resources, allocation, strength, and weakness for each alternative.

Financial Analysis: states...


When the problem arises in making the best financial decision on different alternatives, managerial reports are the major tools that management use to identify and resolute the problems. To prepare management report, accounting department assists in providing relevant information to all level of the organization to assist in the decision making process. To make financial decision on an issue, management always relies on the management report that reveals the financial statement of an organization. Typically, the financial statement is prepared by the accountant, which shows the income statement and balance. Management is deemed successful when an organization has been able to reach its financial target through successful management of assets, capital, liabilities, revenue and expenses.

A prerequisite to decision is that it must ally with management goals. The objective of managerial report is essentially to make the best decision due to complex interacting relationship. Thus, it is very critical for management to make critical and strategic decision for the organization advancement. Strategic decision is concerned with the goals and objectives that management needs to implement. Tactical decision is executable decision that results from the strategic decision, and management tool is very critical to implement tactical decision. Managerial report provides elaborate method and technique to execute tactical and strategic decisions.

To implement decision, manager requires information from management accountant. For example, if the management requires implementing flexible budget for the organizational goals, management will require information on variable costs rate. It is the duty of the company accountant to provide report on variable cost rates that will help the management to make decision on the flexible budget. As being revealed in Table 2, management requires different information to implement selected tools.

Table 2: Tool and Required Information for Management Decision


Required Information

Flexible Budget

Variable cost rates

Variance Analysis

Standard Cost

EOQ models

Purchasing cost, carrying cost

Incremental analysis

Opportunity cost, escapable cost

Cash Budgeting Model

Future cash inflows, future cash

Cost-volume-profit analysis

Variable cost percentage, fixed cost, desired income.

As being revealed in Table 2, there is connecting link among the following:

Financial statement items

Strategic and tactical decisions

Management accounting techniques

Decision-making information

For example, if Sparklin Automotive Company (SAC) decides to improve the quality of service for customers, and there is a need to equip the staff with portable computers. To make decision on the best portable computer to order, management will require a report on the cost of the alternative portable computers and their specifications for the improvement of the client site.

Following is a sample of managerial report for the management:

Sample Managerial Report

1. Purpose

Purpose of this report is to analyze two portable computers and recommends a suitable computer for the use of staff at client's locations

1.1: Scope

The report investigates the corporate use of these computer, standard features and optional benefits.

1.2: Method

The information was collected by contacting the individual company on the technical specifications of the machines.

2. Findings

2.1 Micro-pro 8500 Series

Cost: $7,890 RRP

Weight: 4.5 Kg

Size: (W x D. x H) 357 x 275 x 50mm

Screen size: 15.1"

Clarity of screen image: Resolution could be higher, set at 1,024 x 768.

RAM: 64 Mb, RAM can be raised to a maximum 128Mb for $1,130

Disk Drive: CD-ROM and 3.5" FDD

Speed of the CPU: Pentium processor

Battery capabilities: Lithium-ion battery, smart battery option available. Lithium-ion battery lasts 2.5 hours without smart battery upgrade.

Service agreements and warranties: Two-year parts and labour warranty

2.2 Hewlett Packard 3000 CTX 5/233

Cost: $8,240 RRP

Weight: 3.1 Kg

Size: (W x D. x H) 304…

Sources Used in Documents:


McGraw-Hill Higher Education (2008).Distinguish between managerial and financial accounting.

The McGraw-Hill Companies. USA.

University of North Carolina, (2010).Introduction to Managerial Accounting. University of North

Carolina E-Book.

Cite this Document:

"Sally Jones New Assistant Tony Billan Chief" (2011, August 16) Retrieved September 28, 2021, from

"Sally Jones New Assistant Tony Billan Chief" 16 August 2011. Web.28 September. 2021. <>

"Sally Jones New Assistant Tony Billan Chief", 16 August 2011, Accessed.28 September. 2021,

Related Documents
Automotive Parts Suppliers Automotive Industry Faced a
Words: 803 Length: 3 Pages Topic: Transportation Paper #: 85660505

Automotive Parts Suppliers Automotive Industry faced a serious decline in production in last few years resulting in concurrent decline in production of vehicle parts. Unfortunately the production and consumption of vehicle parts made in the U.S. declined more sharply than total sales of vehicles primarily because due to economic recession, people moved from big trucks and SUVs to smaller passenger cars. As consumption at home declined, exports of automotive parts increased

Automotive Bailout
Words: 1279 Length: 4 Pages Topic: Economics Paper #: 3962437

Automotive Bailout: The three major firms in the United States automotive industry asked the government for a bailout worth $34 billion in December 2008 in order to avoid bankruptcy. These companies asked for the bailout from government because their demise could result in approximately 3 million layoffs within a year, a measure that could plunge the American economy further into economic recession. These three major firms in the American automotive industry

Automotive Industry Current Automotive Market Current Market
Words: 1443 Length: 4 Pages Topic: Transportation Paper #: 31718903

Automotive Industry Current automotive market Current market make up of the global automotive industry: Impact on the American economy Not so long ago, the death knell of General Motors was being sounded by many economists. However, GM has rebounded, largely thanks to its international presence, particularly in Indian, China and Russia. "General Motors [has] appeared to regain its one-time perch as the world's largest automaker. With 2011 sales of more than 9 million vehicles,

Automotive Software for Parts Stores
Words: 3891 Length: 10 Pages Topic: Business Paper #: 53499449

At this stage one does not know which of all the solutions will be the best for solving the problems of the organization. (Racing to compete, the automotive industry goes on demand) One of the solutions Now let us look at one area where IBM has helped an organization to improve its dealing in the wholesale market, as probably Kirk Motors is both a retailer and a wholesaler with only one

Automotive Company: China the Automotive Industry in
Words: 604 Length: 2 Pages Topic: Transportation Paper #: 42841101

Automotive Company: China The automotive industry in China has seen significant growth over the last decades. The country's economic growth has increased the potential for the industry in t his market, since there is an increase in demand for passenger vehicles by general citizens. This has made the market favorable for new entrants, and for existing market participants to grow and prosper (Holweg, Luo, and Oliver, 2005). The automotive company in question

Automotive National Renewable Energy Laboratory
Words: 611 Length: 2 Pages Topic: Energy Paper #: 90175959

In fact, a hybrid car t is a cross between a gasoline-powered car and an electric car. There are two kinds of hybrid cars. One way is a parallel hybrid. In this, a fuel tank supplies gasoline to the engine. But it also has a set of batteries that supplies power to an electric motor. Both the engine and the electric motor can turn the transmission at the same time,