Which statement best compares financial accounting and managerial accounting?

• A. Financial accounting is not governed by any standards, but managerial accounting must follow GAAP.
• B. Managerial accounting reports are always published for external stakeholders, while financial accounting reports are kept confidential.
• C. Financial accounting focuses on providing information to external users, while managerial accounting is intended for internal decision-making.
• D. Managerial accounting is primarily concerned with historical data, whereas financial accounting emphasizes future projections.

Answer: (C)

Verified step by step guidance

1. Understand the key difference 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.
2. Analyze the options provided in the question. Eliminate any statements that are factually incorrect or misrepresent the roles of financial and managerial accounting.
3. Option 1 states that financial accounting is not governed by any standards, but managerial accounting must follow GAAP. This is incorrect because financial accounting must adhere to standards like GAAP or IFRS, while managerial accounting does not have to follow such standards.
4. Option 2 claims that managerial accounting reports are always published for external stakeholders, while financial accounting reports are kept confidential. This is incorrect because financial accounting reports are intended for external stakeholders, and managerial accounting reports are typically confidential and used internally.
5. Option 3 correctly states that 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. Option 4 is incorrect because managerial accounting often involves future projections, while financial accounting primarily deals with historical data.