Users
Time focus
Verifiability vs.
relevance
Precision vs
timeliness
Subject
Rules
Requirement
Financial Accounting
External users who make
financial decisions
Historical perspective
Objectivity & source
documents
“Fair” report of
operations and financial
position
Primary focus is on
companywide reports
Must follow GAAP/IFRS
and prescribed formats
Mandatory for external
reports
Managerial Accounting
Managers who plan for
and control an
organisation
Future emphasis
Satisfying management
needs
Getting information to
managers when they need
it
Primary focus is on
segment reports
Not bound by outside
rules
Not mandatory
Types of business organizations:
-
-
-
Proprietorship
o Single owner
o Tend to be small retail stores or solo providers of professional services
o Personally liable for all business debts
o Distinct entity, separate from its proprietor for accounting purposes 
business records should not include personal finances
Partnership
o 2 or more parties
o Income and losses flow through to partners  via agreed upon
percentage interest in biz
o Many are small or medium-sized
o General partnerships have mutual agency and unlimited liability  each
partner can conduct biz in name of the entity and make agreements that
legally bind all partners without limit for the partnership’s debts  risky
o LLP: only liable up to investment put in  EXCEPT for 1 general partner
with unlimited liability for all partnership debts
Corporation
o Owned by shareholders (stockholders)
o Able to raise large sums of capital by issuing shares
o Legally distinct from owners
o Shareholders have no personal obligations for the corporation’s debts,
limited liability
o Shareholders elect board of directors,
 Set policies