NOTES CHAPTER 1 - student

The three functions 4 accounting system one part of

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Unformatted text preview: hree functions. 4 ACCOUNTING SYSTEM (one part of the organization’s management information system) Accumulates data for use in both financial and management accounting Cost Accounting System (one part of the organization’s overall accounting system) Accumulates cost information MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING Information for decision making, planning, directing, and controlling an organization’s operations, and assessing its competitive position. Published financial statements and other financial reports. INTERNAL USERS OF INFORMATION EXTERNAL USERS OF INFORMATION Managers at all levels in the organization. Stockholders, financial analysts, lenders, unions, consumer groups, and governmental agencies. Exhibit 1: Management Accounting, Financial Accounting & Cost Accounting 5 DIFFERENCES BETWEEN MANAGEMENT ACCOUNTING & FINANCIAL ACCOUNTING Management Accounting Users of information Managers, within the organization. Regulation Not required and unregulated, since it is intended only for management. Financial Accounting Interested parties, outside the organization. Required and must conform to generally accepted accounting principles. Almost exclusively drawn from the organization’s basic accounting system, which accumulates financial information. The organization’s basic accounting system, plus various other sources, such as rates of defective products manufactured, physical quantities of material and labour used in production, occupancy rates in hotels and hospitals, and average take-off delays in airlines. Nature of Reports & Reports often focus on subunits within Reports focus on the enterprise in its the organization, such as departments, entirety. Based almost exclusively on Procedures divisions, geographical regions, or historical transaction data. product lines. Source of Data Based on a combination of historical data, estimates, and projections of future events. 6 THE SIMILARITY BETWEEN MANAGEMENT ACCOUNTING & FINANCIAL ACCOUNTING 1 Record Keeping 2 Performance Evaluation 3 Decision making 4 Principles of stewardship 5 Accounting system Concern with selecting, measuring and accumulating of data concerning business transaction. Excess performance and find any variance between actual and planned performance for further action to be taken. Involve in choosing the best between alternatives. Carry the responsibility to appropriately record and report performance. Procedures and guidelines are organized and used accordingly. THE ROLE OF THE MANAGEMENT ACCOUNTANT Management accountants are responsible for identifying, collecting, measuring, analyzing, preparing, interpreting, and communicating information used by management to achieve the basic objectives of the organization. Management accountants need to be sensitive to the information needs of managers. Management accountants serve as staff members of the organization and are responsible for providing information; they are usually intimately involved in the management process as valued members of the management team. 7...
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