Question

CA 1-4 (Financial Accounting) Omar Morena has recently completed his first year of studying accounting. His instructor for next semester has indicated that the primary focus will be the area of financial accounting.

Instructions

1. Differentiate between financial accounting and managerial accounting.
2. One part of financial accounting involves the preparation of financial statements. What are the financial statements most frequently provided?
3. What is the difference between financial statements and financial reporting?

Short answer

Financial accounting refers to the preparation of reports for general purposes, whereas managerial accounting provides information to the inside of an organization.

The financial statements that are most frequently provided include the balance sheet, the income statement, the cash flow statement, and the statement of shareholder’s equity or owner’s equity.

Financial statements like balance sheets or cash flow statements consist of information relating to a certain subject. On the other hand, a financial report consists of information on various other related topics.

Step-by-step solution

Meaning of Financial statement

A reported statement that provides useful information of the business to its directors, stakeholders, potential investors, and creditors is referred to as a financial statement.

Difference between financial accounting and managerial accounting.

Financial accounting may be defined as the art of recording, classifying, and summarizing in a significant manner in terms of money transactions and events, which are in part at least of a financial character and interpreting the results thereof. On the other hand, managerial accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation, and accumulation of financial information to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources.

Financial accounting provides information regarding the status of the business and the results of its operations to management as well as to its external parties. Whereas managerial accounting assists management in informing policies and planning and controlling the business enterprise's operations.