What is the association between financial accounting and managerial accounting?

Answer 1

Financial accounting is typically geared towards external reporting to outside parties. This could include banks, lenders, shareholders, the SEC. Financial accounting follows a framework and standards such as Generally Accepted Accounting Principles or International Financial Reporting Standards. The importance of financial accounting is painting a clear financial picture of the organization for outside users.

On the other hand, managerial accounting is geared toward internal decision makers. This could be management, executives, or other strategy setting members of the organization. This accounting may not necessarily coincide with the standard mentioned above. The importance of managerial accounting is in providing valuable information to aid decision making the organization.

The overlap or association lies in the data that is used to create both types of reporting or accounting.