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Chapter One

Introduction to Managerial Accounting

ACG 2071 - Fall 2010

External Users of Accounting Information


Shareholders Creditors

Potential Investors
Government Agencies (IRS, SEC, etc.)

ACG 2071 - Fall 2010

Internal Users of Accounting Information


Employees Managers

ACG 2071 - Fall 2010

Accounting Information for External Users


Guided by rules (GAAP, IFRS, tax code, etc.) Generally not flexible Historical Information Emphasis on organization as a whole

ACG 2071 - Fall 2010

Accounting Information for Internal Users


No rules, geared to specific company Flexible and timely

Forward-looking, concerned with future


Emphasis on business segments

ACG 2071 - Fall 2010

The Role of the Managerial Accountant


No Longer Bean Counters Analyze and interpret accounting information (not prepare) Assists management in the decision making process

ACG 2071 - Fall 2010

Management Activities What Managers Do


Decision Making Planning

Directing (related to operational activities)


Controlling

ACG 2071 - Fall 2010

Planning Activities
Develops company objectives and goals Short-term (operational) planninggoals for less than one year Long-term (strategic) planning goals for more than one year Often use budgets and pro-forma financial statements
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Directing Activities
Decisions made by managers related to running the day to day operations of a business. Examples include preparing work schedules, purchasing decisions, pricing decisions, small decisions effecting customers, etc.
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Controlling Activities
To make sure goals are met Monitor and evaluate organizational performance Examples include performance reports which compare budgeted vs. actual information

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Key Concept
Never make decisions with just the numbers! Always consider non-numerical (qualitative) information.

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Professional Ethics in Accounting


Competence Confidentiality

Integrity
Credibility

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Total Quality Management - a


Focus on Quality
Meeting or exceeding customers expectations...

Product performs as it is intended. Product be reliable and durable. Examine business functions to eliminate defects and waste.

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Other Management Issues


Sarbanes-Oxley more responsibility for accuracy of financial statements. Economy shift less manufacturing, more service businesses. Issues with globalization Impact of e-commerce

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