Managerial Finance Office memorandum
to: Sally Jones
subject: Managerial V.S. Financial Accounting
As you have previously worked at a financial firm preparing and processing financial statements and financial journal entries, I am positive that you are very aware of how financial accounting works. However, since you have been hired on as a managerial accountant’s assistant, it occurred to me that you might not be as aware of what a managerial accountant does. I would like you to have the best chance at performing the functions required for your position. To do this, I feel that I should explain to you some of the differences and similarities between managerial accounting and financial accounting as well as show you an example or two of what you should expect to have to do to create a managerial report. This memorandum is for this purpose.
As financial accounting has been your area of expertise for a significant amount of time now, you are already aware of what financial accounting does and is. However, in light of explaining what managerial accounting is, I feel it necessary to explain financial accounting as well. This is not because I think your knowledge in this area is in any way faulty but I feel it necessary to be thorough.
The main goal of financial accounting is to prepare reports for outside sources such as stockholders, investors, or for tax purposes (Financial Accounting. (n.d.). There are a few different financial accounting systems but the most common are Accrual and Cash methods (Financial Accounting. (n.d.). The cash method recognizes revenue on a cash basis only. This means that neither the revenue nor the expenses are acknowledged until after the cash is received. This is great for small businesses but is not very logical for large business.
Large companies would be more than likely to use the accrual method of accounting. The accrual method is recording...