Accounting Overview

Both Managerial Accountants and Financial Accountants produce reports and information explicit to their position within their company. Financial and Managerial Accountants begin with the same raw data to generate different report. These reports differ and can be used by several audiences for different purposes. Financial Accounting is an analysis of a company’s past performance and is a backward way of thinking. Financial accounting is in plain black and white and leaves little to the imagination. The numbers used in financial accounting tend to be concrete since they are based on past company performance. Financial statements are prepared with the idea that for people outside of the company will be looking at them.

Managerial Accounting is a forward way of thinking that guides relevant company decisions. Management accounting is more imaginative than financial accounting. There is more speculation and projection involved than in financial accounting. Managerial reports use financial statements generated by Managerial Accountants to promote company movement and growth. These reports project how a company can grow and manage company resources more efficiently. These reports are generally prepared for executives or relevant people within a company. Managerial reports are more detailed.

Financial statements are an analysis of the overall financial activities of a company. A balance sheet reports on a company's liabilities, net equity and assets for a specific period. An income statement or profit and loss statement reports on a company's results of operations for a specific period. A cash flow statement is a report on the cash flow activities of a company. Cash flow activities include investing, financing activities and investing. A shareholder’s equity statement addresses shareholder wealth and the money that is left over to be paid out to a company’s shareholders. One of the main goals of any company is to make its’ shareholders wealthy. Shareholder wealth is a sign of a successful company.

The objective of financial statements is to give the audience information about a company’s performance and financial position. Financial statements should always be reliable, comparable and relevant and understandable to the audience. Financial statements should be easily interpreted by an audience who possess a reasonable knowledge of economic activities, accounting and business concepts. The audience must be willing diligently to study the information provided in the statements.

Financial statements are used by a many audiences for an assortment of reasons. Some of the people who use financial statements are employees, CFO’s, managers, business owners, investors, shareholders, tax authorities, creditors and financial institutions. Employees of a company may use financial statements to assess the value of their company when negotiating pay increases. They may also use financial statements when they sign up for a 401K or when they anticipate revenue from company profit sharing. Investors may use financial statements when deciding if they want to invest in a company. Investors will be able to assess the past performance of the company and speculate what future revenue may be. Financial institutions may use financial statements when