Class #: 6
Beljot, Lally Manlapat
SEAT WORK/OUTPUT: No. 1 – Chapter 1 (4points for each question)
Answers must be brief and concise.
1. Differentiate Financial Accounting from Management Accounting.
The difference between financial and managerial accounting is that financial accounting
is the collection of accounting data to create financial statements, while managerial accounting is
the internal processing used to account for business transactions. Financial accounting helps to
classify, analyze, summarize, and record financial transactions of the company. The main
objective is to showcase an accurate and fair picture of the financial affairs of the company. To
understand it well, first, we should start with a double-entry system and debit & credit, and then
gradually should understand journal, ledger, trial balance, and four financial statements.
Management Accounting collects, analyses, and understands the financial, qualitative,
and statistical information to help the management make effective decisions about the business.
Management accounting is much pervasive in scope since the entire business is moved by a
single decision made by the top management. The strategy is a significant component of it. It
also focuses on predicting future scenarios so that the business gets ready to face new challenges
and to reach new milestones.
However, management accounting can’t exist without financial accounting, cost
accounting, and statistics. Management accountants gather data from financial accounting and
evaluate the performance of the financial affairs of the company so that they can predict better
targets and can improve the performance in the next year.
2. How does Management Accounting serve both internal users and external users?
Management Accounting serve both internal user and external user to organization,
stockholders, potential investors, creditors, government taxing agencies and individuals
employees and top management of an organization to help them analyze the current and future
profitability of an organization.
3. Why is Managerial Accounting information more “futuristic oriented than
financial accounting?
Management accounting is more furistic oriented than finacial accounting because
- Is more future oriented than financial accounting.
- Tends to summarize information more than financialaccounting.
-Is primarily concerned with providing information toexternal users.
-Is more concerned with precision than timeliness.
4. Discuss the relationships between goals, planning, and controls.
Relationship between goal, planning and control. Planning is the basic function of every
enterprise as in planning we decide what is to be done, how it is to be done,when it is to be done
and by whom it must be done. Planning bridges the gap between where we are standing todayand
where we want to reach. Controlling means keeping a check that everything is in accordance
with plan and if there is any deviation, takingpreventive measures to stop that deviation.The
meaning of controlling makes it clear that controlling function is undertaken for right and timely
implementationof plans. Goals can be somewhat abstract and big picture, but they set a wide,
overarching target for the company to set their eyes on as a whole. Goals define the general
intentions and ambitions of the business but can be difficult to measure.
5. Define the three levels of planning.
To best understand the relationship between the different types of plans, let's start at the top.
Strategic plans are designed with the entire organization in mind and begin with an organization's
mission. Top-level managers, such as CEOs or presidents, will design and execute strategic plans
to paint a picture of the desired future and long-term goals of the organization.
Tactical plan support strategic plans by translating them into specific plans relevant to a
distinct area of the organization. Tactical plans are concerned with the responsibility and
functionality of lower-level departments to fulfill their parts of the strategic plan.
Operational plan sit at the bottom of the totem pole; they are the plans that are made by
frontline, or low-level, managers. All operational plans are focused on the specific procedures
and processes that occur within the lowest levels of the organization.Financial accounting
focuses on recording past transactions, managerial accounting is more future-oriented. Since
managerial accounting information is associated with decision making, it should be focused on
helping make sound decisions with the best information available at the time.
