Accounting Chapter 1
2023 Update
Management Accounting / Managerial Accounting
- the Institute of Management Accountants - A profession that involves
... [Show More] partnering in
management decision making, devising planning and performance management
systems, and providing expertise in financial reporting and control to assist
management in the formulation and implementation of an organization's strategy
Financial Accounting
- financial statements must be in accordance with Generally Accepted Accounting
Principles (GAAP)
- Securities and Exchange Commission (SEC) requires that the annual financial
statements of publicly traded company's be audited by independent certified public
accountants - Focuses on providing stockholders and creditors with the information they
need to make investment and lending decisions
Managerial Accounting
- there are not GAAP type standards or audits required needed
- designed to help Internal management - confidential info, not made available to the
public
- much of it focuses on the future rather than on the past, any info related to
management is included
- managerial accounting systems vary from company to company - Focuses on
identifying, interpreting, analyzing, and implementing the financial information internal
management needs to run the company efficiently, effectively, and profitably
Planning, Directing, and Controlling - Managerial accounting helps mangers fulfill their
three primary responsibilities:
Decision Making - Identifying alternative courses of action and choosing among them
Planning
- managerial accounting translates these plans into budgets. Managers look at budgets
to determine whether its expansion plans make financial sense - Involves setting goals
and objectives for the company and determining how to achieve them
Budgets - The quantitative expression of a plan
Directing
- management uses sales and costs information by store, region, and distribution
channel, to run daily business operations
- use that info to adjust product offerings, marketing strategies, and retail expansion
decisions - Overseeing the company's day-to-day operations
Controlling
- if actual costs are higher than planned, or actual sales are lower than planned, then
management may revise its plans or adjust operations - Means evaluating the results of
business operations against the plan and making adjustments to keep the company
pressing toward its goals
Perception: accountants are nothing more than "bean counters" - plugging numbers into
set formulas and using a black and white set of rules to churn out information for others
to use
Reality: they are professionals who use an immense amount of critical thinking, insight,
and judgement. They partner with management to make critical business decisions.
They are now referred to more as business advisors, analysts, or finance professionals
- Perception vs reality on accountants?
Yes, accounting numbers are rarely as precise as they may seem because of different
methods, assumptions, estimates, measurement choices, etc. These gray areas could
lead to financial estimates that are on the high side or on the low side.
- managerial accounting always begins with a relevant business issue or economic
event - Are there gray areas in accounting?
- Entrepreneurs
- Business Management (even decision will be rooted in revenue & cost info)
- Marketing and Sales (you will be intimately involved w/developing the budget. Look at
what products are most profitable. Company's stance on sustainability may impact your
ability to attract customers)
- Nonbusiness majors (no matter what career path, every activity you engage in will
impact costs/revenues of your organization. You will be expected to operate under
limited resources) - Managerial accounting is important to all careers:
"finance function" and the people who work this function are often referred to as
analysts. - There is a huge overlap in business between managerial accounting and
finance that both are often referred to as the...
Accounting - The language of business
Board of Directors (non employees)
Continues... [Show Less]