Chapter 1 Introduction to Managerial Accounting
Branches of Accounting
Financial accounting: accounting for revenues, expenses, assets,
and liabilities. It involves the basic accounting processes of
recording, classifying, and summarizing accounting.
Managerial accounting: Accounting designed to provide
information to various management levels for the purpose of
Internal financial statements
Financial Accounting Reports
Period financial statements
And related disclosure
External Decision Makers
Managerial Accounting Reports
Detailed plans and continuous
Internal Decision Makers
Cost accounting: Accounting for recording, classification,
allocation, and reporting of current and prospective costs.
Tax accounting: Accounting for the preparation and filing of tax
forms with governmental agencies. Usually focusing on income
tax at the federal, state, and local levels, but may also include
sales, excise, payroll, and property taxes.
Auditing: Accounting involved with reviewing and evaluating
documents, records, and control systems.
Internal audit: reviewing and evaluating internal control
External audit: called financial audit. It is most often
associated with the independent and external audit. The
external auditor reviews the financial statements of the
hospitality operation, its underlying internal control system,
and its accounting records in order to render an opinion of the
Accounting systems: Review of the information systems of
hospitality organizations. Information systems include not only
the accounting system but other elements such as reservations.
Fundamental Accounting Equation
Assets=Liabilities + Owners’ Equity
All the resources owned by the hospitality entity
Cash, inventory, accounts receivable, land, buildings, and
The claims of creditors against the assets of the hospitality
Creditors have a claim against these assets until amounts they
loan to the hospitality organization have been repaid
Accounts payable (amounts owed to suppliers), notes payable
(amounts owed to the bank), income tax payable, long-term
debt payable, and accrued payroll
The claims of the owners of the hospitality organization
Also called the stockholders’ equity
Dual-aspect concept: based on the fact that there are ownership
claims to all things of value. This concept is expressed in the form
of the fundamental accounting equation.
All transactions have a dual effect on the equation, maintaining its