Chapter 1 - Chapter One An Introduction to Managerial...

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Chapter One: An Introduction to Managerial Accounting and Cost Concepts Managerial Accounting –  Concerned with providing information to managers (people inside an  organization who direct and control its operations). It provides essential data needed to run organizations. Financial Accounting –  Concerned with providing information to stockholders, creditors, and  others who are outside an organization. It provides essential data used by outsiders to judge a company’s performance. Managerial accountants provide a variety of reports: How well managers or business units have performed (compare actual results to  plans & benchmarks). Provide timely frequent updates on key indicators such as orders received, order  backlog, capacity utilization and sales. Investigate problems such as decline in profitability of a product line. Analyze developing business situation or opportunity. Financial accountants produce a limited set of quarterly and annual financial statements in  accordance with GAAP. Managers carry out three major activities: Planning  – select course of action and specify how it will be implemented. Directing and Motivating  – mobilize people to carry out plans & run routine  operations. Controlling  – ensuring that plan is actually carried out & appropriately modified as  circumstances change. Planning  - Identify alternatives and then select from among the alternatives the one that best  furthers the organization’s objectives. Budgets  – Formally express the plans of management. They are prepared under the  direction of the controller, who is the manager in charge of the accounting department.  They are prepared annually and represent management’s plans in specific quantitative  terms.  Directing and Motivating  – Overseeing day-to-day activities and trying to keep the organization  functioning smoothly. Requires the ability to motivate and effectively direct people. Managers assign tasks to employees, arbitrate disputes, answer questions, solve on-the- spot problems and make many small decisions that affect customers and employees.
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Managerial accounting data, such as daily sales reports, are often used in this type of  day-to-day activity. Controlling  – Managers seek to ensure that the plan is being followed. Feedbacks  – the key to effective control because it signals whether operations are on  track. It is provided by various detailed reports.
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