Financial Accounting provides information designed for review by external parties, while managerial accounting produces information that is to be used internally, by managers and other employees.
Financial accounting focuses on presenting the financial condition of a firm, and important details such as revenues and losses. This information is generally sought by external parties that include potential lenders and shareholders.
Firms are legally obliged to prepare financial accounting reports for sharing with relevant stakeholders.
Managerial accounting is prepared mainly for the internal review process, and the information is used in formulating plans, strategizing, and setting goals. This is not legally mandated, but part of a firm’s growth strategy.
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