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Comparing Managerial and Financial Accounting
Comparing Managerial and Financial Accounting
Learning Objectives
Identify the features of managerial accounting and the
1 functions of management.
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LEARNING
OBJECTIVE
1 Identify the features of managerial accounting and
the functions of management.
Comparing Managerial and Financial
Accounting
Managerial accounting provides economic and financial
information for managers and other internal users.
ILLUSTRATION 1-1
Differences between financial
and managerial accounting
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Management Functions
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Organizational Structure 1 Managerial Accounting
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Direct Materials
Raw materials that can be physically and directly associated
with the finished product during the manufacturing process.
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Manufacturing Costs Manufacturing Costs
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Manufacturing Costs
Manufacturing Overhead
Costs that are indirectly associated with manufacturing
the finished product.
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Costs that are an integral part of producing the Includes all selling and administrative expenses.
product.
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Product Versus Period Costs Product Versus Period Costs
KRT Boards. Here are some of the costs that your snowboard
factory would incur. Assign the following costs:
Illustration 1-4
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Illustration 1-5
Computation of total
manufacturing costs
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A bicycle company has these costs: tires, salaries of employees who Income Statement
put tires on the wheels, factory depreciation, advertising expenditures,
lubricants, spokes, salary of factory manager, salary of accountant, Under a periodic inventory system, the income statements of
handlebars, and salaries of factory maintenance employees. Classify a merchandiser and a manufacturer differ in the cost of
each cost as direct materials, direct labor, overhead, or a period cost. goods sold section.
Direct Materials Direct Labor Overhead
Tires.
Spokes.
Handlebars.
Salaries of
employees who put
tires on the wheels.
Factory depreciation.
Lubricants
Factory manager
“COGS”
salary.
Advertising expenditures and salary Factory maintenance
of accountant are period costs. employees salary.
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Helpful Hint
Income Statement Assume a periodic
inventory system in
Income Statement
this illustration.
Illustration 1-7
Cost of goods sold sections of
merchandising and manufacturing
Income statements
Illustration 1-6
Cost of goods sold components
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Illustration 1-8
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Balance Sheet Balance Sheet
Inventory accounts for a manufacturer Illustration 1-10 Current assets sections of merchandising and manufacturing
balance sheets
The balance sheet for a merchandising company shows just Illustration 1-11
Current assets sections of
one category of inventory. merchandising and manufacturing
balance sheets
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LEARNING
OBJECTIVE
4 Discuss trends in managerial accounting.
Service Industries
Much of the U.S. economy has shifted toward an
emphasis on providing services rather than goods.
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Refers to all business processes associated with providing Just-In-Time (JIT) Inventory Methods
a product or service.
Inventory system in which goods are manufactured or
For a manufacturing firm these include the following:
purchased just in time for sale.
Illustration 1-12
A manufacturer’s value chain
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Focus on the Value Chain Focus on the Value Chain
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Evaluates operations in an integrated fashion. All employees are expected to act ethically.
Uses both financial and non-financial measures. Many organizations have codes of business ethics.
► Global Crossing,
► WorldCom
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Corporate Social Responsibility 4 Trends in Managerial Accounting
Considers a company’s efforts to employ sustainable Match the descriptions that follow with the corresponding terms.
business practices with regard to its employees, g All activities associated with
1. ______
society, and the environment.
providing a product or performing
Is sometimes referred to as the triple bottom line service.
because it evaluates a company’s performance with a A method of allocating
2. ______
regard to people, planet, and profit. overhead based on each product’s
use of activities in making the
Recent reports indicate that over 50% of the 500
product.
largest U.S. companies provide sustainability reports.
e Systems implemented to reduce defects in finished
3. ______
products with the goal of achieving zero defects.
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Match the descriptions that follow with the corresponding terms. Match the descriptions that follow with the corresponding terms.
b A performance-
4. ______ c A company’s efforts to
6. ______
measurement approach that uses employ sustainable business
both financial and nonfinancial practices with regards to its
measures, tied to company employees, society, and the
objectives, to evaluate a environment.
company’s operations in an
f Inventory system in which
7. ______
integrated fashion.
goods are manufactured or
d Inventory system in which goods are manufactured or
5. ______ purchased just as they are needed
purchased just as they are needed for use. for use.
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