Now, here I would like to move from some more general ideas to some specific comparisons between financial accounting and managerial accounting that, in themselves, will pour some more light on why these studies of managerial accounting is so important. So, I will produce this table that will be entitled managerial accounting versus financial accounting. So, the table would go like this. This will be the area of comparison. That will be managerial accounting, I will use the blue marker for that and that will be financial accounting. I will use the black marker for that and so I will draw, yeah. Table here. And we will embark on this set of comparisons. Well, first of all, the first area is the need. Why do we need to not only to study, but to engage in the process of financial accounting? We'll know the answer here. This is because of this regulatory requirement. First of all, we can not go without that. And then we provide this information for some external users that may be of interest to us. However in managerial accounting it's different because this is, at management discretion. So, strictly speaking, we can ignore managerial accounting altogether. We may limit ourselves with only preparation of financial statements. This way we will satisfy the requirements of the regulators and the external users, but we can say, well you know, we go without that. We do not need any more information. We will make our decisions off the cuff and based on the these financial statements. Well, so far so good. Let's proceed. How about the goals and objectives? Well, here we know the answer to provide information for external users. Well, we also already know the answer here, which is different. This is to assist. Decision making. Planning. Management as it is, and control. So this is kind of very different, but that's not only it. Let's proceed. Who are the users? Of this information. Well here we know that there's all the outsiders, so there are many people like that, and then general unknown. So whoever wants to, these people can use this information. In managerial accounting it's different, it's a small group. Because this is the management. And they are quite known. Well, how about the next thing? What about the structure of these pieces? Well, we can say that here, we know that this is total assets is equal to total liabilities plus total net worth, this is the accounting equation. However the structure of managerial accounting may depend upon the need. Well let's proceed. We have four areas but there are many more. So again, this will be, I will prepare the table. Like this. And again, this will be financial accounting, this will be managerial accounting. The next area will be number 5, standards. And here we know this is GAAP. But here there are no standards. This is all of interest. You can do it whichever way you like. Well, there's some, well, not standard, quote standard approaches that people use more often than less often. But still this is not as rigid. Now the next thing is timing. And here is the huge difference, so this is mostly the past. So you create your financial statements based on the past information. Here is both past and the future. The next thing is unit of measure. And in financial accounts it's mostly US dollars, here it's dollars and anything else, let's say physical. So, we can talk about the number of pieces of something or numbers of tons of oil whatever, that plays an important role. Then the next thing is the period. Here it's quarterly or annually. But in managerial accounting it's as needed. It may be. Well now daily it's unrealistic maybe monthly, maybe bi-weekly. It depends if there's a dynamic project that develops very quickly then you may use some of the approaches, covering really short periods of time. Now, the next thing again, this is. Reports. When your reports issued if you will. Again, here they are with some LAG. So they are not immediate. Here, they are as needed. Well. Now let's proceed we're almost done, but we have to complete this table, so this is again financial accounting. So we have three more and then we'll be able to draw the conclusion. So this is in the managerial accounting. Now I will prepare that for you, now this is number because this sort of funny thing. It's. Information. Accumulation. This is number 11 will be object. And number 12 will be responsibility. Now, in this information accumulation and, I would say, accuracy, which is more important in here. Now we know that the for financial accounting is accurate. And there are few estimates. We also know that the object here is the company as a whole. And we know that responsibility well, there is some legal prosecution. If you did that in the wrong way. But this is unlikely. But it still exists. I'll see what happens with managerial accounting. First of all, we have many estimates. Everything is approximate. A lot is approximate. Now object. This is responsibility center. So that may be a product, may be a project, may be whatever, and find the responsibility. We can say that virtually nothing, well look, because you're not obliged to do so. Now, let's see. Why is it that I spent your time on these comparisons? We can right away see that the key overall difference between managerial accounting and financial accounting is, that first of all it deals with uncertainty. You see these approximate, special centers, no responsibility and many other things. That deals with the understanding of the question of who and what is the driver of a certain use of resources as we will see later there is a special label, the cost driver. So indeed in managerial accounting really, it sort of tries to discover cause and effect things within the processes. And people in the organization, so that's the key story. Financial accounting seems to be cumbersome, boring, and standard. But again managerial accounting is more dynamic, it's not within these rigid standards. So people can be more creative, and therefore you can see that actually managerial account is clearly a much more challenging task. It's no wonder that although in most companies, especially larger companies, the management is indeed involved in the processes of managerial accounting. But these procedures and systems, they not oftentimes lead to some meaningful and positive results, because these processes are very much complex and it only seems to be an approach that can lead to the results that we reached. Unfortunately these are really challenging paths. And often times, we may face wishful thinking situations. So I'm wrapping up this comparisons now and starting from the next episode, we will move on closer to what is studied within the managerial accounting area.
