Accounting-Managerial v.s. Financial

Published by admin on

Managerial accounting is directed towards:
providing information and analysis to managers inside an organization.
Activities performed by managerial accountant include:
1. Determining the cost of providing a service or making a product
2. Assist management in profit planning and formalizing the plans into budgets
3. Determine the behavior of costs and how profit will change as sales and
production volumes change
4. Compare actual costs and financial results with budgeted costs and results
5. Providing cost and sales information necessary for management to use to
make a decision.
Managerial accountants _ reports and _data which often relate to:
prepare reports and analyze data which is often related to parts/departments/functions of the
company rather than reporting on the entire organization as a whole.
Need to knows about FINANCIAL ACCOUNTING:
Reports are provided outside the organization – external reports
Reports past activities
– based on a historical perspective
Reliability of data is emphasized
– reports take more time to provide
Focus on precise information since they are used outside the company
Summarized data for entire company as a whole
Must follow GAAP which has specific required external reports
Need to knows about MANAGERIAL ACCOUNTING:
Does not follow GAAP and there are no reporting regulations
Prepares reports only for management’s internal use
Provides information to make decisions regarding the future
Relevance of data is emphasized over reliability
Focuses on timeliness of information
Nothing is required to be reported, reports what management needs to see
Reporting is focused on parts of the organization such as departments or
divisions and not on the organization as a whole.
A major difference between financial and managerial accounting is:
managerial accounting reports are used exclusively by management.
Managerial and financial accounting both rely on _ for sales and cost information.
general ledger.
what is general ledger?
the financial summary of all transactions of the company.
4 main management functions:
1) planning
2) directing/motivating
3) controlling
4)decision making.
-look ahead and project resources needed to accomplish profit goals.
– Identify objectives the company wants to accomplish which will add value to the company and increase profits.
– Discuss ways to accomplish the objectives
– Prepare budgets to accomplish the profit objective
-Coordinating the activities to produce a smooth running operation.
-Oversee day to day activities and keep the organization functioning smoothly
-Assign jobs/tasks – answer questions – solve problems
-Make sure the plans are being followed and objectives are accomplished
-Performance reporting – compare actual results to the budget
– Implement changes when objectives and goals are not being accomplished
Decision making:
-make changes to operations to improve total company profitability.
-evaluate management performance.
– Use all information provided to make good business decisions.
To gain a general understanding of business, the managerial accountant must:
1) be familiar with the systems that are in place to collect financial info, sales and customer info and other operating data.
2)understand types of costs common to the company (stated in general ledger) and how costs change as volume changes.
3)know the cost of one unit of the company’s product or service(stated on the cost sheet) and how the cost will change as volume changes.
4) understand the flow of costs through inventory and be familiar inventory reports
5)understand each mangers functional responsibility.
job of the senior financial person:
is responsible for all financial accounting and reporting and strategic planning for the company. *often one of the most trusted advisors to executive management and serves as the internal financial consultant.
job of the chief financial officer:
(controller in smaller companies) is responsible for securing the company’s assests, properly accounting for all transactions and preparing financial statements.
-the controller is typically assisted by a financial manager and managerial accountant.
job of financial accounting manager:
is responsible for recording all transactions of the company, maintaining general ledger accounts, managing accounts receivable and paying liabilities. *manager often supervises several people who carry out the day to day activities. (general ledger provides a listing of all accounts and total expenditures for each type of cost during period for the financial accountant).
job of managerial accountants:
make adjusting entries at the end of the period to properly account for inventory and cost of goods sold. (the general ledger is used by managerial accountant to analyze the results of operations and prepare analysis that is used by manager for decision making).
All managerial accounting analysis is done using the _,_,_, and _.
general ledger, cost sheets, inventory reports, and sales reports.
-minimize the cost of production while maintaining quality.
-minimize inventory levels while meeting customer demands.
*most knowledgeable about the cost for each product and are responsible for DM used, DL efficiency, and IDL and facility to make the product.
*involved in making the product and is directly responsible for how much material is used and how many direct labor hours it takes to make one product.
what does the PURCHASING MANAGER do?:
-make sure the company has adequate levels of direct materials.
-minimize the cost of direct materials while maintaining quality.
what do SALES MANAGERS do?:
-determine a competitive price.
-make price adjustments to maximize sales.
-minimize costs associated with salespeople.
-determines standard for direct labor costs.
-hire the most qualified employees.
-minimize labor costs.
-provide quality employee benefits at the lowest cost.
-ensure the company follows all government regulations related to employees.
-meet the information needs of the company at the lowest possible cost. Store and secure data.
-set short term and long term strategic goals.
-obtain resources necessary to meet company goals.
-evaluate the performance of functional managers.
-increase profits.
What is the Institute of Management Accounts (IMA)?:
the organization that is primarily responsible for sharing general guidelines for management accountant.
What is the goal of IMA?:
to assist those working in managerial accounting positions to develop professionally. *the institute provides general guidelines and assistance for managerial accountants and sponsors the Certified Managerial Accountant (CMA) certification.
What did the IMA develop?
“Standards for Ethical Conduct for Practitioners of Management Accounting and Financial Management” to assist the managerial accountant with making ethical decisions.
4 components of Standards for Ethical Conduct..:
1) COMPETENCE: managerial accountants should be professionally competent to perform duties of providing relevant and reliable information.
2) CONFIDENTIALITY: managerial accountants should not disclose confidential info or use confidential info to their own advantage.
3) INTEGRITY: managerial accountants should avoid conflicts of interest and should be objective and unbiased. They should NOT be involved in activities that would discredit the profession.
4) OBJECTIVITY: managerial accountants should communicate information fairly and objectively and disclose any and all relevant information.
Steps in resolving an ethical dilemma:
1st – follow the established procedures within your organization
2nd – if the issue is not resolved to your satisfaction,
– present problems to the next higher management level
— if you are not clear on the issues, discuss with an objective
advisor to clarify your alternatives and solutions
3rd – if the issue can not be resolved, resign from your position
An organization chart shows:
shows who reports to who for each major piece of the company which are formal lines of authority.
Categories: Financial Accounting