Chapter 3
The Accounting Framework
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Fields of Accounting
Businesses large and small need
accountants
to ensure that internal and external users have the
information they need to make informed decisions. There are two general fields of accounting
which focus on the needs of different users: financial accounting and managerial accounting.
Financial Accounting
Financial accounting
is concerned with the recordkeeping of the business and preparing the
financial statements, similar to what has been discussed so far. Financial accounting serves the
decision-making needs of external users of the business. Investors, suppliers, customers, and lenders
all use financial accounting information to make decisions. For example, an investor may decide to
invest more money into a business that reports growing profits, or a supplier may decide to cut ties
with a business that reports low cash flows.
Financial accountants ensure that the information in financial statements (income statement,
balance sheet, etc.) is accurate and up-to-date so that users can make informed decisions. Financial
accountants may be employees of the business they work for, or they may work for an accounting
firm which services many businesses.
Managerial Accounting
Managerial accounting
serves the internal users of the business by preparing specialized reports
to assist in decision making inside the business. Managerial accountants track and classify costs,
prepare and analyze budgets and assist with strategic decision making. Managers and executives
use cost reports and budgets generated by managerial accountants to determine whether certain
products, services, or business functions are still profitable and how to improve if necessary. Mana-
gerial accountants are often employees of the business they work for.
Accounting Designations
An accounting-related education is required to work in the accounting field. Becoming an
accounting clerk requires a college diploma, but many accounting positions (financial or manage-
rial) require further specialized education to obtain an accounting certification. Several different
accounting certifications recognized in Canada recently merged.
In the past, the major accounting certifications were
• Chartered Accountant (CA)
• Certified General Accountant (CGA)
• Certified Management Accountant (CMA)
These certifications were each governed by separate provincial organizations across Canada. On
October 1, 2014, the three designations merged into a single unified designation, the Chartered
Professional Accountant (CPA), reducing the number of governing accounting bodies from 40 to 14.
The primary reason for this merger was to simplify Canadian accounting communities and allow
