Financial Accounting

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Management Verses Financial Accounting


Which of the following statements related to the similarities and differences between management and financial accounting are TRUE?

Select ALL that apply.


Management accounting is used primarily for internal reporting purposes while financial accounting is used primarily for external reporting purposes.


Management accounting must follow Generally Accepted Accounting Principles (GAAP), but financial accounting does not.


Management accounting focuses on the past performance of the company while financial accounting focuses on the future performance of the company.


Management accounting uses estimates extensively and thus does not require the degree of accuracy necessary for financial reporting purposes.


Accuracy of information trumps timeliness for management accounting purposes, but timeliness trumps accuracy for financial reporting purposes.


Information generated by a management accounting system is used primarily for the efficient operation of the company while information generated by a financial accounting system is used primarily by investors and creditors in their role as capital providers to companies.