AHMADU BELLO UNIVERSITY, ZARIA

TEAM F ASSIGNMENT
BY

GROUP QUESTION
Financial Accounting and Managerial accounting are branches of accounting, one is for external
use and other is for external use, Discuss.

What has accounting tried to achieve all these years?

Give brief explanations on the following

Records or record keeping

Planning
Decision Making
Performance
Position of Business
Liquidity
Financing
Control

PRINCIPLES OF ACCOUNTING
(BUAD 803)

MASTERS IN BUSINESS ADMINISTRATION

(MBA)

TABLE OF CONTENT
• INTRODUCTION
• BODY
• CONCLUSION
• REFERENCES
INTRODUCTION
What is Accounting?
Accounting is defined as the recording and reporting of all economic and business activities that
involves currency under a different format and headings in classified and summarized manner.
Accounting can also be defined as the process of recording financial transactions pertaining to a
business. The accounting process includes summarizing, analysing and reporting these
transactions to oversight agencies, regulators and tax collection entities.
Due to complexity of financial activities, development of industry, economies and technical
development, different branches of accounting are inexistence to cater to the form of information
needed by different classes of people. The branches of accounting include managerial
accounting, financial accounting, auditingand cost accounting.
Financial accounting and managerial accounting are two of the largest branches of the
accounting, despite many similarities in approach and usage, there are significant differences
between the financial and managerial accounting. These differences primarily centre on
compliance, accounting standards and target audiences.
What is financial accounting?
Financial accounting is a systematic method of recording transactions of any business according
to the accounting principles. It is the original form of the accounting process. The primary
purpose of financial accounting is to calculate the profit or loss of a business during a period and
provide an accurate picture of the business’s financial position as on a particular date. It also
involves recording and classifying business transactions, preparing and presenting financial
statements to be used by internal and external users. This data is generally historical, meaning it’s
from the past. All financial statements such as balance sheet and income statement must be
prepared according to the generally accepted accounting principles (GAAP). Trial Balances,
Profit & Loss Accounts and Balance Sheets of a company are based on the application of
financial accounting principles. These are useful for creditors and financial institutions to assess
the company’s financial status. It is performed to conform to external regulations and is not for
internal employees to analyse and make financial decisions.
What is Managerial accounting?
Managerial accounting is the practice of identifying, measuring, analyzing, interpreting and
communicating financial information to managers for the pursuit of an organization's goals i.e. it
is presented to a company's internal community varies from financial accounting because the
intended purpose of managerial accounting is to assist users internal to the company in making
well-informed business. It encompasses many facets of accounting aimed at improving the
quality of information delivered to management about business operation metrics. Managerial
accountants use information relating to the cost and sales revenue of goods and services
generated by the company.
The main objective of managerial accounting is to produce useful information for a company's
internal use. It deals with the needs of the management rather than strict compliance with
generally accepted accounting principles. It involves financial analysis, budgeting and
forecasting, cost analysis and evaluation of business decisions. Business managers collect
information that encourages strategic planning, helps them set realistic goals and encourages an
efficient directing of company resources. The management can make decisions efficiently with
the help of various Management Information Systems such as Budgets, Projected Cash Flow and
Fund Flow Statements, Variance Analysis reports, Cost-Volume-Profit Analysis reports, Break-
Even-Point calculation, etc.
Key Differences between Financial accounting and Managerial Accounting
• Financial accounting cares about generating a profit and not the overall system of how
the company works while managerial accounting looks for bottleneck operations and
examines various ways to enhance profits by eliminating bottleneck issues.
• Financial accounting focused on creating financial statements to be shared internal and
external stakeholders and the public. Managerial accounting focuses on operational
reporting to be shared within a company.
• Financial accounting looks at the entire business while managerial accounting reports at a
more detailed level. Managerial accounting focuses on detailed reports like profits by
product, product line, customer and geographic region.
• A business’ profitability and efficiency are reported through financial accounting.
Managerial accounting reports on what is causing a problem and how to fix that problem.
• Financial statements are due at the end of an accounting period, while managerial reports
may be issued more frequently to provide managers with relevant information they can
act on immediately.
• Financial accounting relies on this accurate data for reporting while managerial
accounting frequently deals with estimates opposed to proven facts.
• Financial accounting looks to the past to examine financial results that have already been
achieved, so it is historically focused. Managerial accounting looks to the future with
forecasting.
• Financial accounting is concerned with knowing the proper value of a company’s assets
and liabilities. Managerial accounting is only concerned with the value these items have
on a company’s productivity.
• Financial accounting reports tend to be aggregated, concise and generalized. Information
is simultaneously more transparent and less revealing while Managerial accounting
reports are highly detailed, technical, specific, and often experimental.
• Financial accounting is aimed at providing financial information to parties outside the
organization while in Managerial accounting, information is aimed at helping managers
within the organization make well-informed business decisions.
• Financial accounting must conform to certain standards in accordance with GAAP as a
requisite for maintaining their publicly traded status while managerial accounting is not
for external users, it can be modified to meet the needs of its intended users.

QUESTION 2
What has accounting tried to achieve all these years?
Accounting has achieved the following:
(a) It maintains a complete and systematic record of all transactions and analysing the financial
position of a business. Because every individual or a business concern is interested to know the
results of financial transactions and their results are ascertained which is achieved through the
accounting process.
(b) It helps organizations in achieving their objectives by providing a reliable framework that is
able to consistently produce accurate financial information.
© It play a vital role in running a business because it helps you track income and expenditures.
(d) Ensure statutory compliance.
(e) It provide investors, management and government with quantitative financial information
which can used in making business decisions
(f) Accounting is the lifeblood for the smooth operations of the business. Capital is important but
when there is no proper system for maintaining check and balance. And to know how finance is
going in and out the business, businesses cannot run efficiently.
(g) It communicates the results of business operations to various parties who have some stake in
the business viz., the proprietor, creditors, investors, Government and other agencies.
(h) It helps to ascertain profit or loss during a specified period, to show financial condition of the
business on a particular date and to have control over the firm's property.

QUESTION 3
3. Give brief explanations on the following
Records or record keeping
Planning
Decision Making
Performance
Position of Business
Liquidity
Financing
Control
• Records or recording keeping: The fundamental role of accounting is to maintain a
systematic, complete, accurate and permanent record of all transactions of a business
which could be retrieved and reviewed whenever necessary.
• Planning: Help Organizations plan how they intend to allocate their limited
resources (e.g. cash, labor, materials, machinery and equipment) towards competing
needs in the future by using various forms of budget.
Budgeting is a major component of managerial accounting. Budgets enable organizations
to plan ahead by anticipating business needs and resources. Budgeting helps in
 the coordination of different segments of an organization.

• Decisions making: Accounting helps managers in making a range of business decisions

and developing policies to make the organizational processes more efficient.
• Performance: Accountancy helps in determining how well a business is performing by
summarizing the financial information into quantifiable measures (e.g. sales revenue,
profit, expenses, etc.
• Position of Business: Help show the financial position of a business. Financial position
reflects the financial condition of a business at that time and shows for example how
much capital has been invested in the business or how have the funds been utilized in the
business.

• Liquidity: Mismanagement of cash is often the reason for failure in many businesses.
Accounting helps businesses in determining how much cash and other liquid resources
are at its disposal to pay for its financial commitments. This information is necessary
for working capital management and helps organizations to reduce the risk of bankruptcy
through the timely detection of financial bottlenecks i.e. helps it remain liquid.
• Financing: Accounting helps in securing finance. Whether an organization applies for a
bank loan or an investment by shareholders, it will be required to provide historic
financial record (e.g. profit or loss for past five years) as well as financial projections
(e.g. forecast sales for the next 3 years). In many cases, such information will be required
by the financiers to be verified by external accounting experts known as auditors.
• Control: One of the key objectives of an accounting is to place sufficient internal
controls within an organization for the safeguarding of its valuable resources. Assets of a
business (e.g. cash, buildings, inventory, etc.) are susceptible to losses arising from theft,
fraud, error, obsolescence, damage and mismanagement. Accounting ensures that such
risks are reduced to an acceptable level by placing various checks or control across the
organization.

CONCLUSION
Financial accounting and Management accounting are not to be confused with each other. Both
are different. Management accounting serves the management’s needs in decision-making
regarding minimising the cost factor and enhancing profit-making. On the other hand, financial
accounting serves the needs of shareholders, creditors, and financial institutions to ascertain the
company’s financial position. Management accounting records are kept secret for the use of
management only. As a result, they are not made public.
REFRENCES
• Horngren, C. T. (1981) I ntroduction to Management Accounting, 5th Edn. Pren ti ce-
Hall.
• Amey, L.R. and Egginton, D.A. (1973) Management Accounting: A Conceptual
Approach. Longman, Harlow, Essex.
• Financial Accounting Standards Board (FAS) (1979) Financial Reporting and Changing
Prices: SFAS 33
• www.investopedia.com › terms › accounting
• https://www.fool.com/the-blueprint/accounts-receivable
• https://www.accounting-simplified.com/financial/introduction/objectives-purpose/
• https://corporatefinanceinstitute.com
• https://www.academia.edu/5372320/Introduction_to_Managerial_Accounting
• Gheorghe Andrei, Managerial Accounting - An Essential Component of the Information
System, https://www.researchgate.net/publication/331524965
• Larry M. Walther; Managerial and Cost Accounting, www.bookboon.com
• Managerial accounting, www.resources.saylor.org/books