Rating the Differences in Financial Accounting Software vs. Managerial Accounting

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Financial accounting software and managerial accounting are similar yet very different. Topping the list of differences is who you prepare the reports for, and the fact that one is based on the past and one on the future. Managerial accounting has a strong focus on the future, and financial accounting software focuses more on past financial transactions. Both types of software for accounting, however, are used in planning and tracking financial data. The similarities are so close that it could be easy to confuse the two because they are both based on finances, but use caution when making your decision so that you do not make the wrong one.

Relevance of Financial Accounting Software

Financial accounting software’s data is expected to be objective and able to be verified. Since it’s difficult to verify estimates for sales based on future expansion, managerial accounting might be more useful for this. Financial planning software, however, will prove to be very helpful in providing relevant data for information that will lead to the decision on whether or not to expand your company and how large it should be. It can sometimes be difficult to determine which type of accounting should be used, but the decision will be based solely on the information needed and what the purpose of that information will be.

Major Differences with Financial Accounting Software and Managerial Accounting

  • Reports in financial accounting software are for those outside of your company, while managerial accounting reports are more for the planning, directing and motivating of your employees.
  • The reports from financial accounting software are based on summaries of financial consequences of the past activities of your company, while the reports from managerial accounting are based on the decision making of the future.
  • Financial accounting software emphasizes objectivity and verifiability, while managerial accounting focuses on the relevance of items that are related to the decision making process.
  • Financial accounting software focus on the precision of its reports, and managerial accounting focuses on the timeliness of its reports more than its precision.
  • When a report is made with Financial accounting software, it is a summary of data for your entire company; whereas the reports in managerial accounting will break things down into categories for you, such as departments, products, customers, and employees.
  • Financial accounting software is mandatory for external reports, while managerial accounting is not.
  • Financial accounting software must follow the guidelines prepared by the Generally Accepted Accounting Principles (GAAP), and managerial accounting does not need to follow these guidelines.

Summary of Financial Accounting Software

As you can clearly see, there are some very significant differences to each type of accounting software system. Financial accounting software as well as managerial accounting can both benefit your company greatly. Depending on what you need the software to do, and what information you need for your reports, deciding on which type of accounting you must use should be easy to determine.