8/7/2019 Week_1_DQ_1
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Introduction
Accounting has always been a necessary and important part of
business activities. Through prudent
accounting, businesses are able to know the financial status of
their businesses. They are able to know
how they are spending and how much income they are making. They
are also able to control their
expenditure. There are so many users of accounting information.
These include business managers,
employees, to management, stakeholder, shareholders etc. All
these users have different needs and
for accounting information and apply it according to their
particular needs.
Financial accounting
The main purpose of financial accounting is to prepare financial
reports about a companys
performance. Such information is useful to external parties such
as owners, creditors investors, tax and
regulatory authorities etc. financial accounting is a different
representation of cost and financial
performance which includes assets and liabilities. Financial
accounting is based on information derived
from immediate past business activities and takes into account
external reporting. Financial accounting
is guided by standards such as GAAP (generally accepted
accounting principles).
Managerial accounting
Managerial accounting is mainly used for internal decision
making processes. Managerial counting does
not necessarily follow any rules used by standard setting bodies
but uses standards set by the business
industry. The data collected is usually used by managers for
decision making for future activities. Cash
flow and performance measurement are important aspects of
Managerial counting. Both Financial
accounting and Managerial accounting use the same basic
accounting data however interpret it
differently.
Finance / Financial Management
Financial Management has to do with how best the company manages
its financial resources. It mainly
has to do with capital acquisition and resource allocation.
Financial Management aids decision makers in
choosing the best financial options out of a range of possible
alternatives. Issues to be considered in
financial management include how best to utilize capital to meet
organizational objectives and goals. In
managing resources risk management is also an important aspect
of Financial Management.
Management needs to access the risk associated with their
investment decisions and allocation of
resources. Financial management makes use of both financial
accounting and financial management to
aid in decision making.
Conclusion
The importance of accounting in business cannot be understated.
Accounting information provides
stakeholders and business a true picture of the heath of the
business. Based on this, management can
make important decisions and appropriate measures or necessary
actions to protect the health of the
business and to strive for growth. Financial accounting,
Managerial accounting and Financial
Management therefore play an important role in the business
decision making processes.
