Managerial Accounting vs.

Financial Accounting
The key difference between managerial accounting and financial accounting relates
to the intended users of the information. Managerial accounting information is
aimed at helping managers within the organization make well-informed business
decisions, while financial accounting is aimed at providing financial information
to parties outside the organization.

Financial accounting must conform to certain standards, such as generally accepted

accounting principles (GAAP). All publicly held companies are required to complete
their financial statements in accordance with GAAP as a requisite for maintaining
their publicly traded status. Most other companies in the U.S. conform to GAAP in
order to meet debt covenants often required by financial institutions offering
lines of credit.

Because managerial accounting is not for external users, it can be modified to meet
the needs of its intended users. This may vary considerably by company or even by
department within a company. For example, managers in the production department may
want to see their financial information displayed as a percentage of units produced
in the period. The HR department manager may be interested in seeing a graph of
salaries by employee over a period of time. Managerial accounting is able to meet
the needs of both departments by offering information in whatever format is most
beneficial to that specific need.

KEY TAKEAWAYS
Managerial accounting involves the presentation of financial information for
internal purposes to be used by management in making key business decisions.
Techniques used by managerial accountants are not dictated by accounting standards,
unlike financial accounting.
The presentation of managerial accounting data can be modified to meet the specific
needs of its end-user.
Managerial accounting encompasses many facets of accounting, including product
costing, budgeting, forecasting, and various financial analysis.