Question

Differentiate broadly between financial accounting and managerial accounting.

Short answer

The major difference is that financial accounting is performed for external users and management accounting is performed for internal users.

Step-by-step solution

Definition of Accounting

Accounting is defined as a system that records, processes, and manages the financial activities of a particular business entity for a particular period. Accounting can be further bifurcated into two separate parts that are financial accounting and managerial accounting.

Definition of Financial and managerial accounting

Financial accounting is the subdivision of accounting that deals in the preparation of financial statements of a company by utilizing the financial data abstracted from the accounting process; these financial statements are used to illustrate their financial performance and

Managerial accounting is an accounting field that deals with identifying, measuring, analyzing, and interpreting accounting data to assist managers in making informed operational decisions.

Conclusion

The major difference between financial and managerial accounting is that financial accounting is performed to represent the financial situation to outside parties such as investors, creditors, suppliers, and customers, whereas managerial accounting is performed for effective decision making and for internal use only.