Chapter_1_Fall_2010_Handout_1__Wd_

Chapter_1_Fall_2010_Handout_1__Wd_ - CHAPTER 1 INTRODUCTION...

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CHAPTER 1 INTRODUCTION TO MANAGERIAL ACCOUNTING I. Role of Managerial Accounting in Organizations A. Decision-Making Orientation 1. The primary goal of accounting is to provide information for decision making . 2. The major difference between financial accounting and managerial accounting is the intended user of the information. a. Financial accounting information is used by external parties, such as investors, creditors, and regulators. b. Managerial accounting information is used by internal business owners and managers. LO 1 - Describe the key differences between financial accounting and managerial accounting. B. Comparison of Financial and Managerial Accounting 1. Financial accounting information a. Used by external parties, such as investors, creditors, and regulators. b. Classified financial statements prepared according to GAAP. c. Objective, reliable, historical . d. Prepared periodically (monthly, quarterly, annually). e. Information reported for the company as a whole . 2. Managerial accounting information a. Used by internal parties, such as managers and employees. b. Various Non-GAAP reports, such as budgets, performance evaluations, and cost reports. c. Subjective, relevant, future oriented . d. Prepared as needed , perhaps day-to-day or even in real time. e. Information reported at the decision making level (by product, region, customer, or other business segment). LO 2 - Describe how managerial accounting is used in different types of organizations to support the key functions of management. C. Types of Organizations 1. There are three types of organizations based on the type of goods or services offered: 2. Historically, managerial accounting focuses heavily on manufacturing firms. In today’s economy, nonmanufacturing firms are becoming increasingly important. Therefore,
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managerial accounting must meet the needs of both manufacturing and nonmanufacturing firms. D. Functions of Management 1. Regardless of the type and size of the organization they manage, all managers perform the same basic functions as follows. a. Planning involves setting long-term goals/objectives and short-term tactics . b. Organizing involves arranging for the necessary resources needed to achieve the plan. c. Directing/leading involves putting the plan into action and motivating others to work toward the plan’s success. d. Control involves comparing actual results to planned results to see if objectives are being met.
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