The principal difference between management accounting and financial accounting is that financial accounting information is:
A)Prepared by managers.
B)Intended primarily for use by decision makers outside the business organization.
C)Prepared in accordance with a set of accounting principles developed by the Institute of Certified Management Accountants.
D)Oriented toward measuring solvency rather than profitability.

Question

Quizplus · Accepted Answer

Financial accounting information is intended primarily for use by decision makers outside the business organization, such as shareholders, investors, and creditors. On the other hand, management accounting information is prepared by managers and intended for use within the organization to assist with decision-making and planning. Financial accounting information must also adhere to generally accepted accounting principles (GAAP) established by the Financial Accounting Standards Board (FASB), while management accounting does not have such stringent guidelines. The orientation of financial accounting is toward measuring the profitability, financial performance, and financial position of the organization rather than solvency. Therefore, option A and C are incorrect, and option D is incomplete.

The Principal Difference Between Management Accounting and Financial Accounting Is