What are the differences between Financial and Internal Accounting?
External accounting represents the everyday general accounts; GL, AR, AP and Fixed Assets. These basic systems, designed generations ago, were not originally meant for internal accounting ,( which aims to provide internal information to managers about the cost of production), but were intended financial reports for bankers, stockholders, etc., and that is why they are termed External Accounting. The internal world has not been afforded in the United States the same scientific attention that the external accounting has received. External accounting has the Income Statement, Balance Sheet, Profit and Loss Statement, standard ledgers and journals, etc., but there are no standards in place today for internal accounting. Internal accounting consists of a set of structured accounts, designed to mirror a companies business. Accounts are set up for cost elements (expenses from external accounting), departments (cost centers), functional activities and production accounts. By preparing budget a
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