Financial Analysis

Introduction

Table of Contents

Accounting can generally be defined as the analysis as well as interpretation of financial data. In this regard, accounting is a general term that covers several areas which are distinct in themselves. In this text, I will differentiate and contrast between general financial accounting, cost accounting and management accounting relative to finance.

General financial accounting

Goldratt et al. (1984) notes that financial accounting is concerned withthe formulation as well as presentation of financial statements for a wide variety of stakeholders including but not limited to regulatory authorities, employees, shareholders etc. hence the information generated by the management has to follow some laid down provisions i.e. the generally accepted accounting principles (GAAP).

Management accounting

According to Goldratt (1984), who in some cases are referred to as corporate accountants are in most are responsible for such areas as budgeting in a company. Management accountants basically help the management of a corporation to come up with better decisions with regard to the various control as well as management functions through the interpretation of accounting data. Hence the information generated by the management accountants unlike other forms of accounting is in most cases for use by an organizations management and is in most cases confidential.

Cost accounting

Cost accounting is basically concerned with the formulation of actual as well as budget costs for the various processes, operations, departments etc within an organization and profitability as well as variance analysis (Eisen 2007). With that in mind, cost accounting is utilized by the management of a company to improve profitability by reducing costs

Conclusion

It is important to note that the various fields of accounting actually complement each other and hence each plays a pivotal role in the various operations of a business. With that in mind, it is good to note that all the financial experts within an organization are instrumental in performing in-depth financial analyses so as to take the business to the next level.

References

Eisen, P.J. (2007). Accounting. Barron’s Educational Series

Goldratt, E. M., & Cox, J. (1984). The goal. Croton-on-Hudson, NY: North River Press.

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