Both Financial and managerial accounting provide accounting data that allow individuals to make informed decisions about a company. They allow both inside and outside stakeholders to decide what is the right thing for them to do, whether it is to invest money, …show more content…
According to Hermanson, managerial accounting allows managers to make informed decisions on where to direct the company to further increase profits (Hermanson, 2011). While managers do look at reports from financial accounting, it does not provide them the necessary data to be able to make decisions that will help the company financially. Because of the internal use of managerial accounting, it is not under government control. If a company wants to falsify managerial accounting reports, they will ultimately only be hurting themselves instead of outside persons. By providing detailed financial data, managerial accounting reports allow management to see what divisions of the company is making money, and what divisions of the company is struggling. By seeing this information, management is then able to make decisions on how to help the struggling division, or cut it from the company all …show more content…
The company was then given to a group of heirs. This group was unsure if they should keep these businesses, and if they kept any of them, which one they should keep. Initially they only had finial accounting documents to help them make their decision. The financial accounting reports told them how much they were spending on the hotel, and how much income they were making from the hotel, the office building, and the apartment. It did not tell them how well the office and the apartment were doing. One of the owners decided to produce a managerial accounting report for all of their assets. Once it was complete, the heirs were able to see that they were making significant more money from the hotel than they were the office building and the apartment building. These reports help them make the final decision that they should sell the office building and the apartment, but keep the hotel. By selling the office and the apartment, the group of heirs would be able to invest that money, and increase their profits by a larger percentage than if they were to keep the office or apartment.
Managerial and financial accounting both serve a great purpose, but for two different groups of people. Outside stakeholders use financial accounting reports to increase their profits, while managers use managerial accounting to increase