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Financial accounting reports on an organization’s performance within a precise period, such as
quarterly, monthly, or yearly, in the most straightforward manner possible in alignment with
Generally Accepted Accounting Principles (GAAP). On the contrary, managerial accounting aims
at assisting managers in making sound business decisions to guide the organization and it is not
mandatory for them to be prepared in compliance with the Generally Accepted Accounting
Principles (GAAP). While some management reports are prepared at fixed intervals, most of the
reports are developed as the management needs the information and are designed for project
management, products, sales margins or other organizational purposes.
Scenario 1
This is a managerial accounting scenario as the aim is to widen the gross profit by decreasing
costs, analyzing the past cost data, and developing a budget grounded on assumptions and
projections aligning with the goals of managerial accounting. Typically, managerial accounting
revolves around internal decision-making by allowing managers to use non-monetary and
monetary information to control, plan, and implement strategic decisions to strengthen the
profitability and efficiency of the corporation (Treece, 2021). In this scenario, the production
managers use cost reports, budget development, and collaborating with the purchasing
manager, representing internal management-oriented actions that are attributes of managerial
accounting efforts.
Scenario 2
This scenario is a financial accounting incident. It uses the Generally Accepted Accounting
Principles (GAAP) and presents standardized and objective information regarding the enterprise,
which is a part of financial accounting efforts. Financial accounting is interested in offering
reliable and accurate information to external stakeholders, including the general public,
creditors, investors, and regulators. The quarterly reports comprise balance sheets, income, and
cash flow statements, developed to provide transparent insights into the company’s financial
position and performance. Providing this type of information assists external parties in
understanding the business’s liquidity, profitability, and general monetary health. This differs
from managerial accounting, which aims to empower internal managers to make decisions to
optimize operational efficiency. However, it focuses on ensuring consistency and efficiency in
reporting to stakeholders to guide them in making informed decisions (Treece, 2021).
Scenario 3
Financial accounting would be an ideal option for Deacon Corporation in designing reports for
the bank. In this scenario, the local bank will assess the company’s financial ability and viability
to honor its obligation regarding the requested $4,000,000 loan by assessing its balance sheet,
income statement, and cash flow statement. These reports will give the bank a clear picture of
the company’s financial performance.
Scenario 4
Financial accounting principles will be used to prepare financial statements to be used by the
auditing agent. The responsibilities of the auditing agent include verifying the accuracy and
consistency of the organization’s accounting practices and financial statements precisely related
to specific expenses as reported in the tax return, which aligns with the financial accounting
principles. This is different from managerial accounting principles, which aim at providing the
management with the ability to make informed decisions and will, therefore, not align with the
external financial statements used during the auditing process (Thomson, 2021).
References
Thomson, J. (2021). 2022 Will Be The “Year Of The Management Accountant.”
https://www.forbes.com/sites/jeffthomson/2021/12/20/2022-will-be-the-year-of-themanagement-accountant/?sh=16237e742e2d
Treece, D. (2021). Management Accounting. Business News Daily.
https://www.businessnewsdaily.com/16202-management-accounting.html
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