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acct ch1 - CHAPTER 1 The Accountants Role in the...

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CHAPTER 1 The Accountant’s Role in the Organization 1
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If you have not already read the Introduction page, do so now. It describes the purposes and contents of the Student Guide and recommends a six-step approach for using the Student Guide with the textbook. Overview Welcome to the study of cost accounting. This introductory chapter explains the intertwining roles of managers and management accountants in choosing an organization’s strategy, and in planning and controlling its operations. Unlike the remainder of the textbook, this chapter has no “number crunching.” Its main purpose is to emphasize the management accountant’s role in providing information for managers. Review Points 1. It is important to distinguish management accounting from financial accounting . Management accounting measures, analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Management accounting (a) emphasizes the future, (b) aims to influence the behavior of managers and employees in achieving the goals of an organization, and (c) is not particularly constrained by generally accepted accounting principles (GAAP). Financial accounting focuses on reporting to external parties, such as investors, government agencies, banks, and suppliers. It measures and records business transactions and provides financial statements—the balance sheet, income statement, statement of cash flows, and statement of retained earnings—based on GAAP. 2. Cost accounting measures and reports financial and nonfinancial information relating to the costs of acquiring or utilizing resources in an organization. Cost accounting provides information for both management accounting and financial accounting. 3. Cost management is the approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services. For example, rearranging the production-floor layout might reduce manufacturing costs, or additional product design costs might be incurred in an effort to increase revenues and profits. 4. Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. In other words, strategy describes how an organization will compete and the opportunities its employees should seek and pursue. Companies follow one of two broad strategies: Sell quality products or services at low prices. An example is Southwest Airlines.
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