Analyzing Financial Statements for Planning and Cost

Analyzing Financial Statements for Planning and Cost
Student’s Name
Affiliate Institution
Date

Introduction
This memo goes out to my assistant Susan Thompson. It describes managerial accounting
which plays a crucial role in our company’s management matters. Since you fully comprehend
financial accounting and have experience in it, this memo will relate managerial accounting to
the latter. It will bring forth the similarities and differences between financial and managerial
accounting for easier understanding.
Similarities and Differences between Financial and Managerial Accounting
Similarities
The likeness between financial and managerial accounting is found in their accounting
methodologies. They both make use of data on the institution’s assets, liabilities, expenses,
revenues, and other financial statements. Both are important in finding out the company’s cash
flows by quantifying transactions and business activities (Richardson, 2017). They both to the
creation of financial reports which greatly aid the management and other stakeholders in the
decision making process. They are also helpful in coming up with performance reports which are
vastly vital in comparing the expected results with the actual outcomes of the organization
(Weygandt, Kimmel & Kieso, 2015).
Differences
Managerial accounting is the identification, measurement, accumulation, analysis,
preparation, interpretation and communication of cost information to assist internal managers in
making the proper decisions concerning the organization (Walther & Skousen, 2009). Financial
accounting statements, on the other hand, are presented for use by outside stakeholders thus are
viewed to be more formal (Saadi & Kamal, 2012).

The main purpose of managerial accounting is to provide the costs of products, that is,
product costing. However in financial accounting, a sequence of accounting principles that
control and report all the corporation’s financial accounts are employed (Horngren et al., 2012).
Examples of Managerial Accounting Reports are:
Budget reports this documents the expected expenses and revenues. Managers might use
budgeting information to reduce costs and regenerate terms with suppliers and vendors and also
to provide better incentives for employees (Francis & Ayoola-Akinjobi, 2016).
Cost managerial accounting reports: this computes the costs of objects engaged in the
manufacturing process including overhead costs, costs of raw materials and labor. This helps
managers to decide product selling price, whether to change the production technique as well as
provide product cost for inventory valuation and income determination.
Part 2
To the Board of directors, this memo discusses the information contained in the balance sheet,
statement of cash flows, income statement and statement of stakeholders’ equity.
1) Balance Sheet
The balance sheet provides financial information about assets, liabilities, and capital of the
company at a particular point in time.
Assets: these are all the resources of a corporation including buildings, vehicles, machinery, and
stocks of goods.