BA 213 – Chapter 1 Notes

Formula for the basic concepts of Managerial Cost Accounting:

Sales = Variable Cost + Fixed Cost + Profit

Expanded:

Selling Price times quantity of units = (variable cost per unit times quantity of units) + total fixed cost for
the company + profit.

Accounting – Financial and Operational Data:

 Recording
 Estimating
 Organizing
 Summarizing

There are two types of Accounting: Financial and Managerial

Financial Accounting:

 Reports to those outside the organization: owner, creditors, tax authorities, and regulators
 Emphasizes financial consequences of past activities
 Emphasizes objectivity and verifiability
 Emphasizes precision
 Emphasizes companywide reports
 Must follow GAAP/IRS
 Mandatory for external reports

Managerial Accounting:

 Reports to managers inside the organization for: Planning, Controlling, and decision making.
 Emphasizes decisions affecting the future
 Emphasizes relevance
 Emphasizes timeliness
 Emphasizes segment reports
 Need not follow GAAP/IRS
 Not mandatory