Accounting for Managers

Answer: Financial accounting1 focuses on providing historical financial information to external users. External users are those outside the company,
including owners (e.g., shareholders) and creditors (e.g., banks or bondholders). Financial accountants reporting to external users are required to follow U.S.
Generally Accepted Accounting Principles (U.S. GAAP)2 , a set of accounting rules that requires consistency in recording and reporting financial information. This information typically summarizes overall company results and does not provide
detailed information. Managerial accounting3
focuses on internal users—executives, product managers, sales managers, and any other personnel within the organization who use accounting information to make important decisions. Managerial accounting information need not conform with U.S. GAAP. In fact, conformance with U.S. GAAP may be a deterrent to getting useful information for internal decision-making purposes. For example, when establishing an inventory cost for one or more units
of product (each jersey or hat produced at Sportswear Company), U.S. GAAP requires that production overhead costs, such as factory rent and factory utility
costs, be included. However, for internal decision-making purposes, it might make more sense to include nonproduction costs that are directly linked to the product, such as sales commissions or administrative costs.

https://2012books.lardbucket.org/pdfs/accounting-for-managers

2012

Baihaqi

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