Chapter 1

• What is Managerial Accounting?

  Gathering and analyzing relevant information that is needed to make decisions
• What is the difference between financial and managerial accounting?

  Financial: Provides the financial statements or info that reports the performance of a company to OUTSIDERS

  
  

  Managerial: Provides the financial statements or info to INTERNAL users to help them plan, control, evaluate and make decisions
• Differences in Financial and Managerial in Primary Users?

  Financial: EXTERNAL - investors, creditors, govt regulators

  
  

  Managerial: INTERNAL: Managers and other decision makers in the organization
• What is the purpose for managerial accounting for communicating to their primary users?

  To use INTERNAL info for prepare for the range of decision makers within the organization

  
  

  Does NOT give out to Competitors/OUTSIDERS
• What is the difference in Mandated rules for Financial and Managerial Accounting?

  Financial: GAAP (Generally Accepted Accounting Principles)

  
  

  Managerial: No rules
• What is GAAP?

  Rules that govern how transactions are valued and recorded and how financial info is presented
• Why does Managerial Accounting have no rules?

  Managers have access to all info to create reports for decisions
• What is the difference in Reporting for Financial and Managerial Accounting?

  Financial: Organization as a WHOLE

  
  

  Managerial: Units of an organization who focus on segments of inventory
• What is the difference in the Time Horizon for Financial and Managerial Accounting?

  Financial: Historical/Past

  
  

  Managerial: Future Focus (How will I make more money in the future?)
• What is the difference in Timing of Info for Financial and Managerial Accounting?

  Financial: Precise and at the end of the accounting period (EXACT delivery)

  
  

  Managerial: Guestimate and delivered when needed (TIMELY delivery)
• What are the four responsibilities of a Manager? (PCED)

  1. Planning

  2. Controlling

  3. Evaluating

  4. Decision making
• Define Planning (1)

  Setting goals and directions for the company and determining how to achieve them
• What is the Qualitative expression of a plan?

  Budgets
• What are the two types of planning?

  1. Long-term planning (Strategic)

  2. Short-term (Operational) planning
• Define Long-term planning (Strategic)

  Establishes direction in which the organization wishes to go (Where company is now and where they want to be in the future)
• Define Short-term (operational) planning

  Plan that needs to be done to achieve long term plan
• Define Controlling (2)

  Monitors daily operations OR requires monitoring operations to identify problems requiring corrective action
• How do managers control daily business operations?

  Uses cost reports, products sales info, etc. to run daily operations

  
  

  (The more control => more you prevent mistakes = better results)
• Define Evaluating (3)

  Compares ACTUAL to PLANNED results and assessing the performance of an individual/group who are responsible for results (Monitors individual actions)
• How do the managers evaluate performance?

  Compares budgets to actual results, use feedback to take action if needed
• Define Decision Making (4)

  Choosing a course of action
• Who does each of the managerial responsibilities?

  1. Planning: Upper management (Strat); Upper/Middle management (Operational)

  
  

  Controlling: Managers and Workers

  
  

  Evaluation: Managers

  
  

  Decision making: Managers and workers
• When is each managerial responsibility done?

  Planning: Annually (5-10 yr) (Strat); Monthly/Annually/Quarterly no more than 12 months (Operational)

  
  

  Controlling: Hourly, daily, sooner the better

  
  

  Evaluation: Weekly, monthly, quarterly, annually

  
  

  Decision Making: As needed
• What are the 2 documents or statements of ethics?

  1. Corporate Code of Ethics

  2. Sarbanes-Oxley Act of 2012 (SOX)
• Define Corporate Code of Ethics

  Statement containing business guidelines meant to inform worker behavior that does not fall in line with the company's mission and objectives
• Define SOX of 2012

  Law that protects investors by preventing fraudulent accounting and financial practices at publicly traded companies (BIG regulation on Managers)
• Define Ethical Behavior

  Knowing right from wrong and conducting yourself accordingly so that your decisions are consistent with your own value system and values of those affected by your decision
• Define Code of Conduct

  Set of core beliefs that are meant to guide an employees' behavior
• Managers have access to all info to create reports for decisions


  Why does managerial accounting have no rules