1.1.1 Financial Accounting vs. Managerial Accounting PDF

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These are my notes for Business Administration 103. My teacher is sir Justine....

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1.1.1: Financial Accounting vs. Managerial Accounting Key Finance and Accounting Personnel Managerial accounting focuses on internal users—executives, product managers, sales managers, and any Organizational Structure typical organization chart; it shows how other personnel within the organization who accounting and finance personnel fit within use accounting information to make important most companies. decisions. Managerial accounting information need not Chief Financial Officer conform with U.S. General Accounting The chief financial officer (CFO) is the person Principles (GAAP). Conformance with GAAP in charge of all the organization's finance and may be a deterrent to getting useful accounting functions. The role typically information for internal decision-making reports to the chief executive officer, but can purposes. also be a non-executive vice-chairman or audit and compliance officer. Financial accounting and managerial accounting are both presented in accordance with U.S. Controller The controller is responsible for managing the GAAP. Financial accounting provides historical accounting staff that provides managerial financial information for external users. accounting information used for internal Managerial accounting provides detailed decision making and financial accounting financial and nonfinancial information for internal information for external reporting purposes. users who use the information for decision The three accountants the controller manages are making, planning, and control purposes. as follows: Managerial accountant Planning and Control Function performed by The managerial accountant reports directly to Managers the controller and assists in preparing information used for decision making within Planning and control are the two most important functions that enable management to continually the organization. Reports prepared by managerial accountants include operational plan for the future and assess implementation. Planning is the process of establishing goals and budgets, cost estimates for existing products, budgets for new product lines, and profit and communicating these goals to employees, and Control is the means of evaluating whether plans loss reports by division. Some people use the term cost accountant interchangeably with are being carried out effectively. Many managerial accountant. organizations use this function to compare actual results with the initial plan (or budget) to evaluate Financial accountant The financial accountant reports directly to performance of employees, departments, or the the controller and assists in preparing financial entire organization. information. Reports prepared by financial accountants include quarterly and annual Managers continually plan and control operations within organizations. Planning involves reports. For those outside the company, the accountant prepares U.S. GAAP, which is establishing goals and communicating these goals to employees of the organization. The control based on a company's financial statements. function assesses whether goals were achieved Tax accountant The tax accountant reports directly to the and is often used to evaluate the performance of controller and assists in preparing tax reports employees, departments, and the organization as for governmental agencies such as the US a whole. Department of Treasury.

Treasurer Using Spreadsheet Software Most computerized accounting systems are A treasurer's primary duties include obtaining designed to export data to spreadsheet sources of financing for the organization, software programs such as Excel. "Excel projecting cash flow needs, and managing Spreadsheet shows how a spreadsheet was cash and short-term investments. used to import data directly. This allows the Internal Auditor user to analyze the data more easily. An internal auditor verifies the financial information provided by managerial, financial, and tax accountants. If conflicts arise with the Cost Terminology CFO, an internal auditor can report directly to Manufacturing Cost the board of directors. Internal auditors are All costs related to the production of goods responsible for confirming that the company are called manufacturing costs. Manufacturing has controls that ensure accurate financial costs include direct materials, direct labor and data. manufacturing overhead. The chief financial officer (CFO) oversees all Direct Materials accounting and finance personnel, including the Raw ingredients utilized in the manufacturing controller, treasurer, and internal auditor. The process that may be traced back to the controller is responsible for the managerial, finished product. financial, and tax accounting staff. Direct Labor Workers who turn raw resources into finished goods and whose time may be easily tracked. Ethical issues facing the Accounting Industry Manufacturing overhead refers to any costs connected with the Competence production process other than direct material Members of the IMA must maintain a high and labor costs. level of proficiency in order to fulfill their tasks accurately and professionally. Manufacturing overhead consists of the Confidentiality following: Members of the IMA are prohibited from Indirect material cost Material expenses that are not directly disclosing sensitive information unless they incurred. The cost of materials used to make a are legally required to do so. product that are difficult to trace back to the Integrity Members of the IMA must avoid any conflict product or are not worth tracking back to the product. of interest, including accepting gifts or favors, and must not engage in any action that will Indirect labor cost bring the profession into disrepute. Costs of indirect labor. The expense of workers who assist in the manufacturing Credibility Members of the IMA are required to disclose process but whose time cannot be directly all pertinent information in a fair and objective linked to the finished product. Supervisors in manner. the manufacturing process, for example, who oversee many products and are responsible Computerized Accounting System for hiring, scheduling, and procuring supplies are termed indirect labor. Enterprise resource planning (ERP) Other manufacturing cost Other expenses of production. All additional systems are designed to record and share costs related with the manufacturing, such as information across functional areas and equipment maintenance, insurance, utilities, across geographical areas. and depreciation, are included here.

The raw materials inventory account is used to Nonmanufacturing Costs Non-manufacturing costs, or period costs, are record the cost of materials not yet put into production. The work-in-process inventory the cost of goods and services that are not directly related to the production of goods. . account records the costs of products that are in These costs have two components—selling production but not yet complete. These three costs and General and Administrative Costs . inventory accounts are assets accounts that Selling Costs appear on the balance sheet. the expenses required to secure client orders and deliver a finished product to customers. General and Administrative Costs those associated with an organization's overall management. Direct materials and direct labor are the two types of production costs that can be easily traced back to a product. Production overhead includes all additional manufacturing costs. Nonmanufacturing expenses are classed as either selling costs or general and administrative costs since they are not tied to production. How product cost flow into Accounts Product Costs on the Balance Sheet Each of these accounts is a balance sheet asset account that is used to record product costs based on where the product is in the manufacturing process. Raw Materials The cost of materials that have not yet been put into production is recorded in the raw materials inventory account. Work in Process The cost of unfinished items is recorded in the work-in-process (WIP) inventory account. Cost of goods manufactured The cost of goods made is the cost of completed items that are shifted from WIP inventory to finished goods inventory. Finished Goods The finished goods inventory account keeps track of the expenses of producing things that are finished and ready to sell....