Chapter 1 Managerial Accounting

Budget

A budget is a detailed plan for the future that is usually expressed in formal quantitative terms.

Segment

A segment is a part or activity of an organization about which managers would like to receive data about costs, revenues, and profits.

Decision Making Questions

Decision Making Questions: 1. What should we be selling? 2. Who should we be serving? 3. How should we execute?

Financial & Managerial Accounting (Graphic)

Financial & Managerial Accounting (Graphic)

Financial Accounting

Financial accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators.

Managerial Accounting

Managerial accounting is concerned with providing information to managers for use within the organization.

performance report

Part of the control process includes preparing performance reports. A performance report compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identify and eliminate sources of unsatisfactory performance.

Three vital activities of managerial accounting

Planning involves establishing goals and specifying how to achieve them. Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Decision making involves selecting a course of action from competing alternatives.

Aspects of Managerial Accounting

Reports to managers inside the organization for: 1. Planning 2. Controlling 3. Decision making Emphasizes decisions affecting the future. Emphasizes relevance. Emphasizes timeliness. Emphasizes segment reports. Need not follow GAAP or IFRS. Not mandatory.

Aspects of Financial Accounting

Reports to those outside the organization: Owners, Creditors, Tax authorities, Regulators Emphasizes financial consequences of past activities. Emphasizes objectivity and verifiability. Emphasizes precision. Emphasizes company wide reports. Must follow GAAP or IFRS. Mandatory for external reports.