Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following statements best distinguishes between financial accounting and managerial accounting?

Managerial accounting is primarily concerned with preparing financial statements for external reporting.

Financial accounting is only used by managers within the organization.

Managerial accounting must comply with Generally Accepted Accounting Principles (GAAP), while financial accounting does not.

Financial accounting focuses on providing information to external users, while managerial accounting is intended for internal decision-making.

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Verified step by step guidance

Step 1: Understand the key distinction between financial accounting and managerial accounting. Financial accounting is designed to provide information to external users such as investors, creditors, and regulatory agencies, while managerial accounting focuses on providing information to internal users like managers for decision-making purposes.

Step 2: Recognize that financial accounting must comply with Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), ensuring consistency and comparability for external reporting. Managerial accounting, on the other hand, does not have to follow GAAP or IFRS and can be tailored to meet the specific needs of the organization.

Step 3: Note that financial accounting involves preparing standardized financial statements, such as the income statement, balance sheet, and cash flow statement, which are used by external stakeholders to assess the financial health of the organization.

Step 4: Understand that managerial accounting includes tools like budgeting, forecasting, and variance analysis, which are used internally to support strategic planning, operational control, and performance evaluation.

Step 5: Based on the explanation above, identify the correct statement: 'Financial accounting focuses on providing information to external users, while managerial accounting is intended for internal decision-making.' This aligns with the fundamental purpose of each type of accounting.