Final Notes

Final Notes - Chapter 14 Managerial Accounting o A field of...

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Chapter 14 Managerial Accounting o A field of a accounting that provides economic and financial info for managers and other internal users Managerial Activities o Compute and report costs o Determine behavior of costs (trends) o Prepare budgets and control costs o Present data for decisions o Determine prices Distinguishing features o Applies to all types of business – service, merchandising, and manufacturing o Applies to all forms of business – proprietorships, partnerships, and corporations o Applies to not-for-profit and profit oriented companies Comparing managerial and financial accounting o Similarities Quantify economic events of a business Communicate economic events be to interested parties o Differences Financial Managerial External users : stockholders, creditors, and regulators Primary users of reports Internal users : officers and managers
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Financial statements , quarterly and annually Types and frequency of reports Internal reports , as frequently as needed General purpose purpose Special purpose for specific decisions Pertains to business as a whole, highly aggregated (condensed), limited to double-entry and cost data, generally accepted accounting principles Content of reports Pertains to sublimits of the business, extends beyond double-entry accounting to any relevant data Audit by CPA Verification Process Management Functions o Management’s activities and responsibilities can be classified into the following three broad functions : Planning, Directing, controlling Planning Look ahead Establish objectives such as o Maximize short-term profit o Commit to environmental protection Key objective: add value to the business o Value measured by trading price of stock and by potential selling price of the company Directing Coordinate diverse activities and human resources Implement planned objectives
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Provide incentives to motivate employees Hire and train employees including executives, managers, and supervisors Controlling Develop system of evaluation Determine whether goals are met Keep company on track by making changes when necessary Good decision making is the outcome of good judgment in planning, directing and controlling Business ethics o Business scandals caused massive investment losses and employee layoffs Corporate fraud Employee fraud Financial reporting fraud (intentional misstatement of finances) o Creating proper incentives Effective quality control Realistic budgets Ability to succeed o Sarbanes Oxley Act of 2002 Clarifies managements responsibilities CEO and CFO must certify fairness of financial statements and adequacy of internal control must sign them Board of Directors, especially the Audit committee, must meet certain criteria
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Penalties for misconduct are substantially increased Codes of ethics are now required Manufacturing Costs o Manufacturing consists of activities to
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Final Notes - Chapter 14 Managerial Accounting o A field of...

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