Overview of Managerial Accounting
The Basic Objective of Accounting
The basic objective of ACCOUNTING is to provide STAKEHOLDERS ) with useful
information about a business enterprise in order to help them make rational economic
The basic objective oINANCIAL ACCOUNTING is to providXTERNAL USERS (e.g.,
investors, creditors, financial analysts,…etc.) with useful financial information about the
financial performance health, and cash flows of a business enterprise in order to help them
make investment and credit decisions.
The basic objective ofANAGEMENT A CCOUNTING is to providNTERNAL USERS (i.e.,
managers of a company at all levels) with financial and non-financial information about a
business enterprise that help them make business decisions so as to achieve the goals of
1 Figure 1
Users of Accounting Information (Stakeholders)
External Users Internal Users
(They cannot access the Accounting Records) (They have access to the Accounting Records)
Financial Accounting Auditing Managerial Accounting
Current owners (shareholders): Managers of the firm at all levels
Need Information to make
Want to know if they should hold, buy more, or sell
their shares in a particular company. decisions related to:
Want to know if a company is a good investment.
Creditors: (e.g., suppliers, banks, ...etc.) Planning Implementing Controlling
Want to know if they should extend credit to the firm, the Pla& &
how much to extend, and for how long. Making Evaluation
Income tax authorities:
Want to know if taxable income is measured properly.
Others…. (e.g., Financial Analysts, Labor Unions,
Customers, Legislators, Government regulators). Feedback
1. Balance Sheet measures the Financial Health of the Company.
2. Income Statement measures the Financial Success of the Company.
3. Cash Flow Statement measures the Liquidity of the Company.
1. How does a company decide on the amount of information to disclose?
2. In what format should its financial information be presented?
3. How should each item be measured?
Companies must prepare the Financial Statements according to generally accepted set of
rules, standards, principles, and concepts referred to as:
Generally Accepted Accounting Principles (GAAP)
2 Figure 2
Planning Implementing the Plan & Controlling &