Management accounting and financial accounting - Essay Example

This academic paper discusses as well the elements that allow them to serve a common purpose. Another focus of the study is determining the reason financial accounting is standardizing, while managerial accounting applications are highly variable. Financial accounting is the oldest approach to the accounting discipline. Bookkeeping the ancient form of record keeping is the base in which financial accounting in based on. Civilization established Before Christ (B.C.) such as the Greeks utilized bookkeeping to keep track of economic activity.

The founding father of accounting was a mathematician of Italian decency called Luca Pacioli who mentored geniuses such as Christopher Columbus and Leonardo Da Vinci (Murphy, 2002). The accounting profession based on the accounting equation of Assets = Liabilities + Equity appeared in the middle ages (Weygant & Kieso & Kimmel, 2002). Financial accounting utilizes the foundation of the accounting equation in combination with the double entry system to record, track, monitor, identifies, communicates and analyze economic activity generated by a business entity or non-profit organization.

The accounting cycle illustrated in appendix B culminates with the released of the four major financial statements. The four financial statements (FS) released by corporations on an annual basis as well as the interim financial released quarterly are the income statement, the balance sheet, the statement of cash flow and the statement of retained earnings. This statement must be filed by public companies which are firms whose equity is trade publicly in stock exchanges such as the New York Stock Exchange (NYSE) to meet regulations of the Security Exchange Commission (SEC) (Varian, 2003).

Financial accounting serves the important purpose of providing timely information the user of financial information that allows the general public to make decisions in whether or not to