Explain the major difference between managerial and financial accounting.

Financial is largely concerned with financial statements for external use by those who supply funds to the firm and by other persons who may have vested interest in the financial operations of the firm. The suppliers of funds include stockholders (the owners of the firm) and creditors (those who supply debt). Investors and those who help digest information for them, financial analysts, are also interested in financial statements.

Cost or managerial accounting is primarily concerned with the accumulation and analysis of information relevant for internal use by managers of planning, controlling, and decision making. The next two sections present some definitions of cost accounting as set forth by the National Association of Accountants, but the key thing to remember is that the financial measures produced may take any form that management considers relevant for internal purposes. Historical information is often used in cost accounting systems, and estimates of future costs or benefits are often included as well. However, the level of detail about particular product lines and divisions is dictated by the needs of management.