If you are an accountant (or hoping to be one), you might already know how huge the field of accounting is. Every business needs accounting in some shape or form, no matter what industry we're talking about.
The bigger the business, the more complex their accounting needs are. And there are so many other factors as well. Does the company cross state lines? International lines? What kind of investors do they have? Since accounting can get pretty complex, different specialties help accountants really hone in on the specific knowledge certain areas demand.
"People often assume that financial and managerial accounting roles are only about crunching numbers," says Rasmussen University Business instructor, Latricia Roundtree. "But recent advancements in technology and AI tools have made the number-crunching part of these roles less time consuming for accountants. These days, they are able to focus more on strategic planning and communicating with management and external stakeholders."
So to anyone who's thinking, accounting is accounting right? What's the difference between managerial accounting vs. financial? Read on!
Financial accounting vs managerial accounting: Overall focus
Financial accounting provides external stakeholders with insights into historical data on the finances of an organization. These financial statements serve the needs of people who are currently invested in the business or are considering doing so. Tax authorities and other regulatory bodies also require certain types of businesses to produce financial statements and share them publicly.
The financial accounting standards board has lots of information about what is regulated and what is enforceable by law when it comes to financial accounting.
Managerial accounting, on the other hand, provides internal stakeholders with past financial results to help make predictions about future financial performance. Management accounting is essential for organizations of all sizes to help identify trends, barriers and opportunities.
This financial reporting is invaluable for both strategic planning and for day-to-day operational efficiency.
The scope of financial accounting
Financial accounting analyzes past performance on behalf of external parties such as investors, tax and other regulatory authorities and creditors. Financial accounting reports include historical financial data, including:
- Income statements: Track revenue, expenses, net income, and profits and losses over a specific time period.
- Cash flow statements: Record the inflows and outflows of cash from its operations and investments.
- Balance sheets: Include detailed reports of an organization's assets, liabilities as well as shareholder equity
- Assets: Property and other tangible assets that a company owns
- Revenues: Income from the sale of products and services and other sources, which may include dividends and interest
- Liabilities: Outstanding debts, including accounts payable
- Equity: A calculation of what an organization is worth after paying off debts and liquidating assets1
Current and potential investors review these statements to learn about the financial stability and likely future growth of an enterprise. This information helps them make decisions about stock market trades.
The U.S. Securities and Exchange Commission also reviews financial accounting reports to verify that companies are complying with financial disclosure regulations.
Why do companies need financial accounting?
Large enterprises and small businesses both benefit from financial accounting.
"All companies should invest in financial accounting," Roundtree says. "It’s imperative that organizations create and maintain financial statements that provide an accurate picture of the financial health of the organization."
Any organization that accepts money should track and manage those funds effectively. This shows transparency and accountability. Even if the company is not publicly traded, they should still maintain accurate and up-to-date financial records to share the financial status of the company with employees during company update meetings.
Also, it’s important to document financial results for auditing purposes.
The scope of managerial accounting
Managerial accounting focuses on producing financial statements and other reports to help organizational leaders make well-informed business decisions. Unlike financial accounting, which is only done every year or every quarter, managerial accounting can be done more frequently. Managerial accounting dashboards can vary from company to company, but often include...
- Forecasting reports: Key performance indicators such as sales reports
- Inventory analysis: Identification of inventory levels, inventory turnover and related costs
- Cash flow reports: Tracking of operating, investing and financing activities
- Budget reports: Estimates based on prior income and expenses
- Margin analysis: Identification of the price to produce various products and services
- Trend analysis: Time analysis that helps management accountants detect future trends that may impact an organization's value
- Performance analysis/performance evaluation: Data analysis of metrics such as percentage of profitability of an organization over various time periods
Receiving timely managerial accounting reports helps businesses swiftly adapt to shifting financial and business scenarios. For example, by reviewing daily managerial accounting reports, an executive might uncover and address cash flow problems or build an aspect of the business where they anticipate substantial growth. Tracking key performance indicators and other financial information also helps with risk management.
An example of managerial accounting
Managerial accounting reports helps businesses in any number of ways.
Case in point: Selena is an accounting manager for a major retail company. Due to the increase in inflation, the leadership team needs to decide whether to increase their prices or adjust their budget. Managerial accounting will help Selena identify ways to cut costs in other areas of the company without having to increase prices or compromise the quality of the company's products.
She will be able to perform data analysis of their income statement and statement of cash flow to discover areas where they can cut expenses. These cost savings can be redirected towards increasing their purchasing power with vendors. As a result, the company will not have to change its pricing strategy.
Financial vs. managerial accounting: Regulations
Publicly traded companies in the U.S. are required to produce financial accounting reports in compliance with financial accounting standards called Generally Accepted Accounting Principles (GAAP).2
Currently, 140 countries also require publicly traded organizations to produce financial statements that comply with International Financial Reporting Standards.3
Since there is no federal accounting standards that dictate what managerial accounting reports include, organizations can customize reports based on their own internally created rules. The reports will vary based on the business operations and the relevant financial information they need for strategic planning. A small service-oriented business will have very different reporting than a large manufacturing plant.3
Common careers in financial accounting
Financial accountants help organizations document and analyze financial performance and stay up to date on the latest financial accounting disclosure regulations. Common financial reporting job titles include:
- Accounting managers: Oversee day-to-day accounting tasks, produce accurate financial statements and develop internal financial accounting policies as needed
- Budget analysts: Review budgets and make recommendations on financial resource allocation
- Cash management accountants: Track the cash inflow and outflow and work with the organization to optimize assets and reduce risk
- Cost accountants: Oversee cost accounting (tracking and analyzing an organization's expenses), create budgets and find opportunities to improve profitability
- Management accountants: Provide financial analysis and help organizations produce financial statements in compliance with tax laws
Common careers in managerial accounting
Managerial accountants support the leaders of businesses and nonprofit organizations with timely and detailed reports on financial and operational activities. These key insights help executives make decisions about resource allocation, improve operational efficiency and more. Managerial accountants communicate regularly at the highest levels of an organization and have access to highly confidential information. Common managerial accounting job titles include:
- Auditors: Verify that financial statements are created in line with standards, such as Generally Accepted Accounting Principles and International Financial Reporting Standards
- Controllers: Prepare financial data such as income reports and balance sheets and supervise internal audits
- Financial analysts: Advise companies on investing in stocks, bonds and other financial instruments
- Financial managers: Analyze an organization's financial records to help them make informed investment decisions
Managerial and financial accounting both involve teamwork
Both financial and management accounting jobs are ideal for people who are detail-oriented and interested in how financial management supports strategic planning and regulatory compliance.
And both roles will also involve LOTS of communication.
"A misconception is that financial accountants do not need to work with others," Roundtree says. While people might understand that managerial accountants do a lot of presenting and explaining things to leadership in their companies, many still think financial accountants spend most of their time in spreadsheets.
In reality, both of these fields involve working closely with colleagues, building a foundation of trust (either with internal or external stakeholders) and learning how to explain and communicate strategic plans.
"The managerial accounting role requires communicating regularly with management and other departments. The financial accounting role requires working closely with investors and other external stakeholders," Roundtree says.
Would you prefer looking inward or outward?
Managerial accounting is utilized mostly by internal managers. It’s used to help with decision-making for the company. They create budgets and detailed reports for various departments, document financial results and identify future trends to help support leadership. Managerial accounting is very instrumental with helping managers plan for the future outlook of the company.
"This type of accounting requires a person to be very detail-oriented and, of course with any accounting job, you have to like working with numbers," says Roundtree. "Also, being very organized helps as well since you have to gather and sort through financial data to help track spending, make accurate forecasts and conduct performance analysis."
Strong communication skills are important, Rountree emphasizes. "If you have effective communication skills and an understanding of the different departments within a company then managerial accounting could be a good career path."
Financial accounting is more about making sure the history and current activity of the company are well-represented to external stakeholders such as investors and creditors. This type of accounting provides an overall picture of the organization's financial health based on past performance. You will create financial statements to be utilized by internal managers, creditors and investors. This role required being detail-oriented as well and making sure the company is in compliance with accounting standards and practices.
"Being a rule follower is a must for financial accounting," Roundtree says. "You have to adhere to very strict Generally Accepted Accounting Practices. Maintaining high ethical standards is necessary for this role. There is a lot of responsibility that comes along with making sure that funds are being managed appropriately."
What skills are needed in financial and managerial accounting?
Although there are significant differences in the two disciplines, many of the skills needed in managerial accounting and financial accounting are similar. There are several attributes that will help you succeed, including...
Communication skills
Both roles require effective communication skills. The ability to interpret and present the numbers to people who do not work in accounting is a necessity. "Managerial accountants in particular should be comfortable with some public speaking. "This is the person in the room that gives the financial impact of every decision that is being considered," says Roundtree.
Active listening skills
Both financial and managerial accountants need to listen closely, process information and use that knowledge to inform their work. "Managerial accountants in particular make decisions that impact the entire organization," Roundtree says. "This person has to understand the inner workings of each department such as HR, sales, production and research."
Creative skills
Many don't realize how much creativity you need to be a great accountant. "Being able to pivot and adjust quickly is necessary especially with changes in economic conditions such as tariffs and inflation," says Roundtree. "Accountants must be able to adapt the budgeting and forecasting for the company's financial health in the midst of shifts in the economy."
Continuous learning
There are few jobs today where you can graduate a program with everything you'll need to know to do the job forever. The business world, laws and regulations and technology all move fast. Managerial and financial accounting requires understanding how to use technology and automation to compile data and create financial documents. You'll have to keep learning to keep up.
Business acumen
These roles require a high level of business acumen in order to work with leaders from various departments across the organization. Financial accounting experts, for example, need to stay abreast of current and changing tax laws.
Managerial accounting professionals need an understanding of how financial management and risk management are inter-related. Proper financial oversight can help companies avoid cash flow problems, comply with tax authorities and gain key insights for making strategic decisions.
Financial vs. managerial accounting: Required education
A bachelor's degree in accounting or a related field is generally required for entry into the fields of financial accounting and managerial accounting. You need a full foundation in accounting principles as well as business practices to really get started in one of these roles.
The intersection of accounting, finance and business is a really interesting place to be. And many people who choose these careers might wonder about if they should study accounting, business, finance, or something else to do the kind of work they like best.
If you're really considering accounting, check out 10 Accounting Pros and Cons to Consider—Before You Make it Your Major to help narrow things down.
1Planful website, Financial reporting and analysis primer, viewed 7/13/25, https://planful.com/financial-reporting-and-analysis/
2Financial Accounting Foundation website, GAAP and public companies, viewed 7/13/25, https://accountingfoundation.org/accounting-and-standards/about-gaap/gaap-and-public-companies
3Advanced education beyond a bachelor’s degree, certifications, and extensive work experience may be required to work as an Accounting Manager, Budget Analyst, or a Cash Management Accountant, It is important to check with state and employer requirements.
