Question

Which of the following is true regarding the comparison of managerial to financial accounting?

a. Managerial accounting is generally more precise.
b. Managerial accounting has a past focus and financial accounting has a future focus.
c. The emphasis on managerial accounting is relevance and the emphasis on financial accounting is timeliness.
d. Managerial accounting need not follow generally accepted accounting principles (GAAP) while financial accounting must follow them.

Answer 1

The true statement about managerial versus financial accounting is that managerial accounting does not have to follow GAAP, while financial accounting is required to do so as it reports to external stakeholders.

Step-by-step explanation:

Among the statements given regarding the comparison of managerial to financial accounting, the true statement is that managerial accounting need not follow generally accepted accounting principles (GAAP) while financial accounting must follow them. Managerial accounting is tailored towards providing information to internal management for decision-making, planning, and control purposes. Therefore, it focuses on relevance and flexibility rather than strict compliance with GAAP. On the other hand, financial accounting aims to provide a true and fair view of the financial position and performance of a company to external stakeholders such as investors, creditors, and regulatory bodies; hence it must adhere to GAAP to ensure consistency, reliability, and comparability of financial reports.