Management Accounting

Financial accounting and managerial accounting are subdivisions of accounting and play an essential role within an organization.

Discuss the major differences between managerial and financial accounting then apply your understanding to the following 4 scenarios. Discuss if these are managerial accounting or financial accounting and why.

1. A company is looking to increase its gross profit by reducing costs for the upcoming periods. To further investigate, the production manager pulls reports that detail costs in the previous year. After discussions with the purchasing manager, he creates a budget based on assumptions and estimates.
2. An investor researching profitable companies pulls quarterly reports of various corporations. The reports are prepared according to GAAP with objective information and focus on the business as a whole. Are the reports prepared using managerial or financial accounting?
3. To fund its expansion in the upcoming year, Deacon Corporation negotiates a $4,000,000 loan with a local bank. The bank requires financial statements to ensure the company's ability to pay interest and repay the principal. Would Deacon Corporation use managerial or financial accounting to create the reports for the bank?
4. During an audit, an agent looks at the company's financial statements to verify that the same accounting practices were used in the tax return for a certain expense. Would the financial statements used by the agent be prepared using managerial or financial accounting?

Directions:

Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate.

Your initial post should address all components of the question with a 500 word limit.

Reply to at least two discussion posts with comments that further and advance the discussion topic.