Bus 254 chapter 1 notes.doc

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Managerial Accounting = concerned with providing information to managers for
internal use (planning, controlling, decision making)
oReports capturing sales, costs, orders received, benchmarking are created
Financial Accounting = concerned with providing information to external users
oFollows GAAP and annual and quarterly statements are prepared
Manager’s activities are planning, directing and motivating, and controlling
Planning
Selecting a course of action and specifying how action will be implemented
Looking at alternatives picking best one
oAlso look at demand for resources against alternatives
Revenues and Costs
Budgets = detailed plan for the future in quantitative terms
oPrepared by controller (manager in charge of Acc Department)
Directing and Motivating
Oversee day-to-day activities and make sure everything functions smoothly
oMotivate and direct people (assigning job, answer questions, settle disputes,
etc.)
Controlling
Control = process of instituting procedures and obtaining feedback to ensure
everything is functioning effectively and towards company goals
Feedback = Accounting and other reports helping managers monitor performance
and problems
oPerformance Report = comparing budgeted data to actual data
The Planning and Control Cycle = flow of management activities (plan direct control
plan)
Differences between managerial and financial accounting
1) Emphasis on the Future
- Strong emphasis on the future for managerial accounting
- Financial provides information of the past
- Use data to improve the future of the company
2) Relevance of Data
- Managerial accounting wants information that is relevant even if it is not
objective or verifiable
- Financial accounting wants objective and verifiable data
3) Less emphasis on precision
- MA takes more consideration in non-monetary figures (customer satisfaction)
i. Don’t have to be as precise as FA
4) Segments of an Organization
-Segments = any part of organization that can be evaluated independently
- MA focuses on segments while FA focus on the entire company
5) GAAP
- MA are not bounded by GAAP as much as FA
i. Because the information is only for internal use
6) Not mandatory
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