Accounting help on: Financial accounting
Financial accounting has been referred to as one of the most important aspects which are used in both small as well as large businesses to safely take care of the finances. Financial accounting is mainly used by the small businessmen to keep their finances in safe hands without having much of knowledge regarding the same. Under financial accounting, the business houses generate financial reports which would be used by investors as one of the main tools to see the financial stability of the enterprise & invest in the same (Drury, 2007). Financial reports have been termed to be the deciding factors as to where to invest & how much to invest. The main role financial accounting is to assess the future growth potential of the organization. With the help of financial accounting, one can track its earnings as well as calculate the levels of loss suffered within the enterprise (Vitez, 2011).
On the other hand, managerial accounting has been referred to as one of the internal business functions of the enterprise. This includes recording & reporting of the transactions within the organization. The main role of managerial accounting is to support the management as well as provide fair analysis & take up different types of decisions (Drury, 2007).
While comparing managerial & financial accounting, on the basis of decision making for managers have been defined as under. In case of managerial accounting the people involved in decision making are stakeholders, shareholders, etc. The basic difference between the two in terms of decision making can be seen i.e. managerial accounting would help in decision making within the enterprise (Vitez, 2011). On the other hand, financial accounting helps in decision making for people who are outside the enterprise. The financial reports are factual & have predictive values which would help the people outside the organization to decide where to invest & how much to invest. Managerial accounting takes into consideration the generation of the reports majorly for the top level management people within the organization (Francis, 2012).
For managers with non-accounting knowledge, managers should try to learn the various financial concepts which would help them in order to take up decisions in an organization. Fair understanding of the financial statements would help the managers from the non accounting background to take up decision making (Vitez, 2011). The second accounting knowledge which shall be imparted to the non accounting knowledge managers would be to value the transactions in the Profit & Loss Statement. Cash Flow Statements shall also be studied which would help them to know about the short term valuation of the company. People belonging to the non accounting background shall have fair knowledge regarding the assets & liabilities. This would help in order to practice communication in the most effective & efficient manner.
Some of the challenges which are associated with managerial & financial accounting are un-uniform of the accounting methods, improper book keeping, and fraud & failing to budget. Use of un-uniform accounting methods refers to one of challenge in managerial & financial accounting (Drury, 2007). Improper budget refers to one of the major challenges with managerial and financial accounting. When the financial information is not recorded in an up to date manner, it leads to high levels of financial loss. Manipulation of the books of accounts also refers to the main challenges in financial & managerial accounting. False reporting of the profits skews the growth of the enterprise leading to a negative image in the minds of the customers (Vitez, 2011).
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