There are plenty of differences between financial and managerial accounting. I just wanted to take the time to explain the differences. There are categories that are different for both managerial and financial accounting. The categories are the emphasis that they have on the future; relevance of data; less emphasis on precision; and segments of an organization (Accounting for management, 2012) .
The emphasis on the future
While the emphasis for planning rests of the past for financial accountants, the future is based on a lot more than just that for managerial accountants. Managerial accountants have a lot more to take into account than what has happened in the past so it is a much longer process. Since the inside of a business environment is constantly changing because of what is happening on the outside, managerial accountants are constantly planning new changes. The difference between the two is that one plans on a regular basis based on what will happen and financial accountants plan based on what has already happened (Accounting for management, 2012). The future cannot always be determined by what has already happened.
The data that financial accountants use is verifiable and completely accurate because they have to figure out finances in order to go forward with their goals. A managerial accountant has the same method of verifying finances but it doesn’t have to be an accurate measure of the data, it only has to be an estimate (Accounting for management, 2012). An estimate can greatly aid them in their plans for the future. The information that they are given and the information that they use must have relevance to what they are trying to figure out at that present time. A financial accountant figures out finances in an effort to help the managerial accountant come up with future plans, budgets, etc.
Timeliness rather than accuracy
A managerial accountant is one step ahead of the financial accountants. Because of this, they have to constantly plan and figure out the data that is set in front of them. They don’t have time to accurately depict the data, they instead use estimates to point them in the direction that they need and want to go. The nearest largest figure is what the managerial accountants focus on when it comes to finances. If sales are above four hundred thousand then they will just estimate to the nearest hundred and not worry about the exact dollar figure of sales, for example. Financial accountant’s job is the figure out the finances, and the managerial accountants place more emphasis on things such as customer satisfaction (Accounting for management, 2012). To them, things like that are more important when it comes to their constant planning. Breaking down finances to an exact science takes way too much time, effort, and money in itself. There are more important things to base decisions off of than just the exact dollar amount, though they do look into and consider it when the information is presented to them.