Essay: The differences between financial and managerial accounting

Abstract
This paper is going to consist of the differences between financial and managerial accounting. Furthermore, the types of information between accounting and financial will be brought up and discussed as well. The Institute of Management Accountants (IMA) Standards of Ethical Conduct for Management Accountants will be emphasized. They have four major bulletin points that define their existence that will be clarified in this paper along with some examples from my own experience.

Managerial and Financial Accounting Report
‘The primary objectives of financial accounting are to provide information that is useful in making investment and credit decisions’ (Williams, Ch. 1). Financial accounting extends its purpose to fulfilling the information pertaining to cash flows, its amount, the timing, and the unreliability of cash flows. Financial accounting also defines the resources of an enterprise in terms of its economics, the claims of those resources, and of course the changes to those resources. Financial accounting ‘is historical in nature, it results from inexact and approximate measures of business activity, and it is based on a general-purpose assumption’ (Williams, Ch. 1).
‘Management accounting information is useful to the enterprise in achieving its goals, objectives, and mission; assessing past performance and future directions’ (Williams, Ch. 1). Importantly, it is also used to judge and offer praise if praise is required based on the decision making that has been initiated. Managerial accounting often receives adoration and deservedly so for it’s ‘timeliness, relationship to decision-making authority, its future orientation, its relationship to measuring efficiency and effectiveness, and the fact that it is a means to an end’ (Williams, Ch. 1). Managerial accounting correlates with companies making minor or sweeping changes regarding the information that managers interpret.
‘Accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business’ (Williams, Ch. 1). Accounting is the nuts and bolts of a company; numbers do not lie and are very universal. Investors, managers, unions of different sects, various governments, and others all rely on those same numbers to make decisions affecting the company. ‘Because the primary role of accounting information is to provide useful information for decision-making purposes, it is sometimes referred to as a means to an end’ (Williams, Ch. 1). It is called the means to the end since the final and gut decisions made by multiple professionals are made based on the information that fine accounting provides.
‘The integrity and clarity of our financial markets depend upon it’ (Jameson).
‘The IMA Standards of Ethical Conduct are designed to be proactive, helping finance professionals to link ethical perspectives directly to their ongoing workplace responsibilities’ (Haywood). The IMA has been quite busy over the past few years since accounting scandals have become more apparent and appalling. There has not been anything huge lately, but a couple of years ago when Enron and WorldCom shook the business world the government was compelled to make drastic changes. Those changes, including the Sarbanes-Oxley Act, I think have done more ill will towards publicly traded companies than good. These types of decisions are often made based on emotion rather than reason but this is another argument that is off the prescribed subject. The IMA has four principles that it stresses, which are: competence, confidentiality, integrity, and objectivity.
Competence is described as ‘perform their professional duties in accordance with relevant laws, regulations, and technical standards’ (Haywood). I would put competence in between reliability and confidence. I had a co-worker last fall who did not know what a direct studies class was. She was on the job for three months, this is what we sold. How can one be competent in their occupation when they do not know fundamental aspects of their job?
Confidentiality is to ‘refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantages, either personally or through third parties’ (Haywood). When speaking to potential students or students of mine that are from the same division, know each other, or even if they are strangers, I would not divulge any information besides the basics to them regarding the other person. There is no reason for them to know another person’s grades or issues in school.
Integrity is to ‘avoid actual or apparent conflicts of interest, and advise all appropriate parties of any potential conflict’ (Haywood). When I was in the navy I had a shipmate who popped positive for drugs. One can not possibly be an honest person or a person of merit when they are cheating themselves out of their career. Especially if one has a family at home depending on them to make simple but strategic decisions in their life. He was tossed out of the navy with little skill or education to market himself with in the civilian world.
Objectivity is to ‘communicate information fairly and objectively’ (Haywood). When I was in the navy I was a Quartermaster (QM). My job was to determine our position on the chart and to relay this information to the Officer of the Deck (OOD) whenever we were supposed too. Good or bad news, we were not ones to determine if that was so, we were there to provide sound and dependable information to the officer. The ship’s movement was based on our advice and plotting skills. The ship being where it was supposed to and reaching our destination on time were critical. The OOD and QM were to act as a team and being objective was the nature of this relationship.

References
Bettner, M. S., Haka, S. F., & Williams, J. R. (2002). Financial and Managerial
Accounting: The Basis for Business Decisions. [Online]. Available:
http://highered.mcgraw-hill.com/sites/0072396881/student_
view0/chapter1/chapter_summary.html
Haywood, E. M. & Wygal, D. E. (2004, November). Corporate Greed vs. IMA’s Ethic
Code. [Online]. Available: http://proquest.umi.com/pqdweb?index=0&did
=735642391&SrchMode=1&sid=4&Fmt=4&VInst=PROD&VT
ype=PQD&RQT=309&VName=PQD&TS=1114147996&clientId=2606
Jameson, J. (2005, April 18). Let’s Get It Right By Fully Accounting for Options.
[Online]. Available: http://proquest.umi.com/pqdweb?index=10&did=
824260651&SrchMode=1&sid=6&Fmt=3&VInst=PROD&V

Type=PQD&RQT=309&VName=PQD&TS=1114148542&clientId=2606

Managerial and Financial Accounting Report
Benjamin Roussey
Financial 540
Mr. Lucht
April 22, 2005

Abstract
This paper is going to consist of the differences between financial and managerial accounting. Furthermore, the types of information between accounting and financial will be brought up and discussed as well. The Institute of Management Accountants (IMA) Standards of Ethical Conduct for Management Accountants will be emphasized. They have four major bulletin points that define their existence that will be clarified in this paper along with some examples from my own experience.

Managerial and Financial Accounting Report
‘The primary objectives of financial accounting are to provide information that is useful in making investment and credit decisions’ (Williams, Ch. 1). Financial accounting extends its purpose to fulfilling the information pertaining to cash flows, its amount, the timing, and the unreliability of cash flows. Financial accounting also defines the resources of an enterprise in terms of its economics, the claims of those resources, and of course the changes to those resources. Financial accounting ‘is historical in nature, it results from inexact and approximate measures of business activity, and it is based on a general-purpose assumption’ (Williams, Ch. 1).
‘Management accounting information is useful to the enterprise in achieving its goals, objectives, and mission; assessing past performance and future directions’ (Williams, Ch. 1). Importantly, it is also used to judge and offer praise if praise is required based on the decision making that has been initiated. Managerial accounting often receives adoration and deservedly so for it’s ‘timeliness, relationship to decision-making authority, its future orientation, its relationship to measuring efficiency and effectiveness, and the fact that it is a means to an end’ (Williams, Ch. 1). Managerial accounting correlates with companies making minor or sweeping changes regarding the information that managers interpret.
‘Accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business’ (Williams, Ch. 1). Accounting is the nuts and bolts of a company; numbers do not lie and are very universal. Investors, managers, unions of different sects, various governments, and others all rely on those same numbers to make decisions affecting the company. ‘Because the primary role of accounting information is to provide useful information for decision-making purposes, it is sometimes referred to as a means to an end’ (Williams, Ch. 1). It is called the means to the end since the final and gut decisions made by multiple professionals are made based on the information that fine accounting provides.
‘The integrity and clarity of our financial markets depend upon it’ (Jameson).
‘The IMA Standards of Ethical Conduct are designed to be proactive, helping finance professionals to link ethical perspectives directly to their ongoing workplace responsibilities’ (Haywood). The IMA has been quite busy over the past few years since accounting scandals have become more apparent and appalling. There has not been anything huge lately, but a couple of years ago when Enron and WorldCom shook the business world the government was compelled to make drastic changes. Those changes, including the Sarbanes-Oxley Act, I think have done more ill will towards publicly traded companies than good. These types of decisions are often made based on emotion rather than reason but this is another argument that is off the prescribed subject. The IMA has four principles that it stresses, which are: competence, confidentiality, integrity, and objectivity.
Competence is described as ‘perform their professional duties in accordance with relevant laws, regulations, and technical standards’ (Haywood). I would put competence in between reliability and confidence. I had a co-worker last fall who did not know what a direct studies class was. She was on the job for three months, this is what we sold. How can one be competent in their occupation when they do not know fundamental aspects of their job?
Confidentiality is to ‘refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantages, either personally or through third parties’ (Haywood). When speaking to potential students or students of mine that are from the same division, know each other, or even if they are strangers, I would not divulge any information besides the basics to them regarding the other person. There is no reason for them to know another person’s grades or issues in school.
Integrity is to ‘avoid actual or apparent conflicts of interest, and advise all appropriate parties of any potential conflict’ (Haywood). When I was in the navy I had a shipmate who popped positive for drugs. One can not possibly be an honest person or a person of merit when they are cheating themselves out of their career. Especially if one has a family at home depending on them to make simple but strategic decisions in their life. He was tossed out of the navy with little skill or education to market himself with in the civilian world.
Objectivity is to ‘communicate information fairly and objectively’ (Haywood). When I was in the navy I was a Quartermaster (QM). My job was to determine our position on the chart and to relay this information to the Officer of the Deck (OOD) whenever we were supposed too. Good or bad news, we were not ones to determine if that was so, we were there to provide sound and dependable information to the officer. The ship’s movement was based on our advice and plotting skills. The ship being where it was supposed to and reaching our destination on time were critical. The OOD and QM were to act as a team and being objective was the nature of this relationship.

References
Bettner, M. S., Haka, S. F., & Williams, J. R. (2002). Financial and Managerial
Accounting: The Basis for Business Decisions. [Online]. Available:
http://highered.mcgraw-hill.com/sites/0072396881/student_
view0/chapter1/chapter_summary.html
Haywood, E. M. & Wygal, D. E. (2004, November). Corporate Greed vs. IMA’s Ethic
Code. [Online]. Available: http://proquest.umi.com/pqdweb?index=0&did
=735642391&SrchMode=1&sid=4&Fmt=4&VInst=PROD&VT
ype=PQD&RQT=309&VName=PQD&TS=1114147996&clientId=2606
Jameson, J. (2005, April 18). Let’s Get It Right By Fully Accounting for Options.
[Online]. Available: http://proquest.umi.com/pqdweb?index=10&did=
824260651&SrchMode=1&sid=6&Fmt=3&VInst=PROD&V

Type=PQD&RQT=309&VName=PQD&TS=1114148542&clientId=2606

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