In comparing management accounting with financial accounting, which of the following statements is true?
A) Both use historical costs as their primary unit of measurement.
B) Both depend on the double-entry system of accounting.
C) Both require adherence to GAAP.
D) Financial accounting reports are more objective, whereas management accounting reports are more subjective.

Question

Quizplus · Accepted Answer

Financial accounting reports are prepared to cater to external stakeholders while management accounting reports are prepared to cater to internal stakeholders. Therefore, the objective of financial accounting is to provide accurate financial information to external users based on GAAP, whereas management accounting reports are more subjective and can be tailored to meet the needs of specific internal users. Both use historical costs as their primary unit of measurement, and financial accounting depends on the double-entry system of accounting. However, management accounting does not require adherence to GAAP.

In Comparing Management Accounting with Financial Accounting, Which of the Following