Question

• Provide information regarding users of managerial accounting and financial accounting. Discuss how each user can utilize this information.
• Explain if you feel there are advantages or disadvantages of utilizing the different areas of accounting.
• Explain how learning about the different areas of accounting have enlightened your perception of pursuing employment in the accounting field.

Answer 1

Financial accounting is the branch of accounting which involves recording,summarising and reporting transactions. It involves preparing financial statements which include balance sheet, income statement,cash flow statements,and changes in equity.Financial information is equally important for both internal and external users.

The internal users of financial information includes:

1. Owners - They use financial information to know the profitability, level of stability and growth.

2.Managers - To monitor the performance and for taking decisions.

3. Employees - They use the information to know how the performance of company have implications on their job security, salaries and other incentives.

The external users of financial information includes

1. Investors- They use financial information for valuation and credit analysis, to know how risky is investment and to assess the profitability of business.

2 .Lenders- Lenders provode loans and other credit facilities. So it is important for them to know the credit worthiness of the business.

3. Suppliers - Suppliers supply goods and services on credit. So it is essential for them to know the credit worthiness and repaying ability of the business.

4. Government- To check whether the rules and regulations are properly complied amd the interest of stakeholders are protected.

5. Auditor - Auditor uses financial information to form an opinion on financial statements and to report.

6. Tax authorities- To analyse whether taxes are paid to government at appropriate rates and to evaluate the tax situation.

7. Public- Public can be journalists, activists, or others who are interested to know the economic development.

Managerial accounting is a branch of accounting which involves identifying, analyzing, measuring, interpreting and communicating the accounting information to managers to help them to take decisions and to achieve organizational goals.

Managerial accounting is intended to provide information to internal users only , that is to the managers.They are helpful for sales managers , executives and other personnels for taking decisions.

There are advantages and disadvantages of using the different areas of accounting. The different areas of accounting include cost accounting, financial accounting, government accounting, forensic, auditing and so on...

The advantage of using different areas of accounting are

1. Maintain business records of each area.

2. Possibility of comparison of results

3. More focus on those areas which requires special attention.

4. Prevention and detection of fraud in particular area.

5. Exercising proper control

The disadvantage  of using different areas of accounting are:

1. Requires experts in each area. So it can be costly.

2. Focus is only on particular area. For eg : financial accounting does not take into account non financial issues.

3. Proper coordination of each areas can sometimes be difficult.

The learning of different areas of accounting have enlightened the perception of pursuing employment in the accounting field.The different areas of accounting which is focused on different areas like cost , tax , financial accounting , etc provides an overall understanding of the whole accounting system. It enables to know more about each area .Proper knowledge of each area enables one to work in any department of an organization. It is helpful in taking proper decision and analyzing the performance.