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Accounting & Financial Management
AFM 123
Seth Bouwers

Chapter 1 – An Intro to Managerial Accounting The Work of Management and the Need for Managerial Accounting Information Financial accounting – the discipline of account concerned with providing information to shareholders, creditors, and other outsiders of the organization Managerial accounting – the discipline of accounting concerned with providing information to managers for use in planning, directing and motivating and controlling within the organization Strategy – the general direction in which an organization plans to move to achieve its goals and objectives  Planning – selecting a course of action and specifying how the action will be implemented; steps involve: o Identifying alternatives and then selecting the one that does the best job of furthering the organization’s objectives o Balancing the opportunities against the demands made on the company’s resources o Management looks at the sales volumes, profit margins, and costs of the company’s established stores in similar markets o Budgets – a detailed plan for the future, usually expressed in formal quantitative terms  Directing and motivating – mobilizing people to carry out plans and run routine operations; involves: o Assigning tasks to employees, arbitrating disputes, answering questions, solving on-the spot problems o Daily sales reports are often used in this day-to-day decision making  Controlling – ensuring that the plan is actually carried out o Control – the process of instituting procedures and then obtaining feedback to ensure that all parts of the organization are functioning effectively and moving toward overall company goals o Feedback – accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed; signals whether operations are on track and key to effective control  Performance report – a detailed report containing budgeted results with actual results; suggests where operations are not proceeding as planned and where they require more attention Planning and control cycle – the flow of management activities through planning, directing and motivating and controlling and then back again to planning Comparison of Financial and Managerial Accounting  Emphasis on the future - Since planning is such an important part of the manager’s job, managerial accounting has a strong future orientation due to the constant economic, customer and competitive changes which occur; whereas financial accounting primarily provides summaries of the past  Relevance and flexibility of data – financial accounting is expected to be objective and verifiable whereas managers want data which is relevant (appropriate for the decision at hand) and flexible enough to provide whatever data needed for a particular decision such as unquantifiable info about customer satisfaction  Less emphasis on precision – since precision is costly in terms of time and resources there is less emphasis than in financial accounting  Segments of an organization – in managerial accounting segment reporting is the primary emphasis o Segments – any part of an organization that can be evaluated independently of other parts and about which the manager seeks financial data  Generally accepted accounting principles (GAAP) – rules the indicate acceptable accounting practice which enhance comparability and help reduce fraud and misrepresentation but they do not lead to the most useful reports for internal decision making; managers can set their own rules concerning the content and form of internal reports  Managerial accounting – not mandatory – various outside parties require financial accounting however Three major changes in the business environment have made managerial accounting more important i
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