Managerial Accounting (Non-GAAP Compliant) vs. Financial Accounting (GAAP Compliant)

There are two related but different types of accounting, managerial (non-GAAP compliant) and financial (GAAP compliant.)

Most day to day bookkeeping is "Managerial Accounting". This type of accounting is flexible and provides decision-making, pricing budgeting, and other information used by the business owner, internal managers, and staff. When you hire or contract a bookkeeper you are most likely getting managerial accounting.

Financial Accounting is mainly used by creditors, investors, potential investors, investment analysis, and other external users. Financial accounting must follow Generally Accepted Accounting Principles (GAAP) to provide general information for credit and investment decisions. For more information on GAAP visit FASAB. Some CPA firms perform financial accounting and prepare GAAP compliant reports.

Both types of accounting serve their purpose in the systematic recording, reporting, and analysis of the financial transactions of a business.

Rhonda H. Smith
--Your QuickBooks Coach