Quick Study Guide
Managerial vs Financial
Managerial Accounting - provides information to managers inside the organization. Financial Accounting – provides information outside the organization, to investors and creditors.
Managerial accountants do: 1. Determine the cost of a service or product 2. Assist with profit planning and budgeting 3. Determining costs behavior and how profits will change with sales changes 4. Compare actual costs to budgeted costs 5. Provide cost and sales information to management to use to make decisions
No required formats for reporting – provide what gives the most useful information.
Management Functions: Planning: identify objectives, prepare budgets – related to future operations Directing/Motivating: Oversee day to day activities, make daily decisions Controlling: compare actual to budget, determine if objectives are accomplished and implement changes needed to meet goals. Decision Making: Management using all information available to make a decision.
FINANCIAL ACCOUNTING: Reports are provided outside the organization – external reports, follow GAAP Reports past activities – based on a historical perspective, reliability is emphasized Focus on precise information since information is used outside the company Summarized data for entire company as a whole
MANAGERIAL ACCOUNTING: Does not follow GAAP and there are no reporting regulations. Reports are internal. Provides information to make decisions regarding the future, relevance over reliability Focuses on timeliness of information Reporting - parts of the organization - departments or divisions, not the whole company
The Institute of Management Accountants:
Provides information on analysis and formats that have proven to be useful over time. Sponsors the (CMA). Developed the Standards for Ethical Conduct: Competence – keep skills at a level to do a good job Confidentiality – don’t tell those who are not authorized to know Integrity – avoid conficts of interest, don’t be biased Objectivity – disclose all relevant information, favorable and unfavorable
Resolving an ethical delimma: 1st – follow the established procedures within your organization 2nd – present problems to the next higher management level