Introduction to Managerial

Accounting
o Definition of Accounting:
The process of identifying, measuring and
communicating economic information to permit
informed judgements and decisions by users of the
information (AAA).
o BUT, who are the users of accounting information?
Users can be divided into two categories:
(i) External parties outside the organization
(served by the Financial Accounting)
(ii) Internal parties within the organization
(served by the Management Accounting)
 Managerial Accounting Vs.
Financial Accounting
Financial accounting Managerial accounting
provides information provides information
to stockholders, for managers of an
creditors and others organization who
who are outside direct and control
the organization. its operations.
Managerial Accounting Vs.
Financial Accounting
 Managerial Accounting Vs. Financial
Accounting (SUMMARY)
• Financial accounting is concerned with
reporting financial information to
external parties, such as stockholders,
creditors, and regulators.
• Managerial accounting is concerned
with providing information to managers
for use within the organization.
Managerial Accounting Vs. Financial
Accounting (SUMMARY)
• Financial accounting
– Focus on past— “results of operations”
– Based on GAAP
– Mandatory reporting with prescribed format (income
statement, balance sheet, etc.)
• Managerial accounting
– Focus on past, present and future (budgeting, planning,
controlling, etc.)
– No constraining standards or requirements—whatever
management needs
 What are the primary functions of
Managerial Accounting?
o Managerial Accounting helps managers perform
three vital activities— planning, controlling, and
decision making.
1. Planning involves establishing goals and specifying how
to achieve them (Planned performance/Budget).
2. Controlling involves gathering feedback to ensure that
the plan is being properly executed or modified as
circumstances change (Planned performance vs. Actual
performance).
3. Decision making involves selecting a course of action
from competing alternatives (Buy or make…).
Management accounting reports
• No specified format as in financial accounting –any
form useful to management.
• Four W’s of Successful Report:
– WHY? Why is report needed? Purpose?
– WHO? Who will use report?
– WHAT? What information is relevant? Detail?
– WHEN? When needed? Timely info? Deadlines?
• Basic purpose of any management accounting
report:
– To provide useful information to management to aid in
planning/controlling/organizing/decisions.
THE END…
 Assignment
oA student planning a career in
management wondered why it was
important to learn cost and
management accounting. How
would you respond? Give some
examples to support your point of
view.
???