Financial

Financial &
& Managerial
Managerial
Accounting
Accounting
The Basis for Business Decisions

TWELFTH EDITION

Williams Haka Bettner Meigs

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 Chapter

1 ACCOUNTING:
Information for Decision Making

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 The
accounting
process

Accounting
“links” decision
makers with Accounting
Economic
economic
activities information
activities  and
with the results of
their decisions.

Actions
(decisions) Decision
makers
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 Types
Types of
of Accounting
Accounting Information
Information

Financial Tax

Managerial

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 Information
Information System
System

Cost
Cost&&Revenue
Revenue
Determination
Determination
Information
Information 
Job
Jobcosting
costing Decision
DecisionSupport
Support
Users
Users 
Process
Processcosting
costing 
CVP
CVPanalysis
analysis

Investors
Investors 
ABC
ABC 
Performance
Performance

Creditors
Creditors 
Sales
Sales evaluation
evaluation

Managers Assets 
Incremental
Managers Assets&& Incremental

Owners
Owners Liabilities analysis
analysis
Liabilities

Customers
Customers  
Budgeting
Budgeting
 Plant
Plantand
and 
Employees
Employees equipment Capital
Capital
 equipment
Regulatory
Regulatory 
Loans
allocation
allocation
agencies Loans&&equity
equity 
agencies 
Receivables, Earnings
Earningsper
per
-SEC Receivables, share
-SEC payables
payables&&cashcash share
-IRS
-IRS 
Ratio
Ratioanalysis
analysis
-EPA Cash
CashFlows
Flows
-EPA

From
From
operations
operations
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From
Fromfinancing
financing © The McGraw-Hill Companies, Inc., 2002
 Basic
Basic Functions
Functions of
of an
an Accounting
Accounting
System
System
 Interpret
and record
business
transactions.

Payment

Car

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 Basic
Basic Functions
Functions of
of an
an Accounting
Accounting
System
System
 Interpret  Classify
and record similar
business transactions
transactions. into useful  Summarize
reports. and
communicate
information to
decision
makers.

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 Objectives
Objectives of
of External
External Financial
Financial
Reporting
Reporting
The
Theprimary
primaryexternal
external users
usersof
of financial
financialinformation
informationare
are
investors
investorsand
and creditors.
creditors.

Cash Flow Prospects

Investors Creditors
Return on Periodic Periodic
Investment dividends interest
Sale of Repayment of
Return of ownership at a loan at a
Investment future date future date
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 (Specific)
Information about economic
Objectives
resources, claims to resources, and
changes in resources and claims. of
Financial
Reporting
Information useful in assessing
amount, timing and uncertainty of
future cash flows.

Information useful in making

investment and credit decisions.
(General)
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 Objectives
Objectives of
of External
External Financial
Financial
Reporting
Reporting
Balance Sheet

Income Statement
The primary
Statement of Cash Flows
financial
statements.

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 Financial
Financial Statements:
Statements:
AALens
Lensto
toView
ViewBusiness
Business i ng
or t
Rep
c i al
an
Fin

Financial
Statements
Fin
anc
ial R
e por
ting

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 Characteristics
Characteristics of
of Externally
Externally
Reported
Reported Information
Information
AAMeans
Meanstoto
an
anEnd
End
Usefulness
Usefulness Broader
Broader than
than
Enhanced
Enhancedviavia Financial
Financial
Explanation
Explanation Statements
Statements

Based
Basedonon Historical
Historicalin
in
General
General Purpose
Purpose Nature
Nature
Assumption
Assumption

Results
Resultsfrom
fromInexact
Inexactand
and
Approximate
ApproximateMeasures
Measures
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 Internal
Internal Users
Users of
of Accounting
Accounting
Information
Information

 Board of Directors
 Chief Executive Officer
 Chief Financial Officer
 Vice Presidents
 Business Unit Managers
 Plant Managers
 Store Managers
 Line Supervisors

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 T y p ic a l S im p le O r g a n iz a tio n C h a r t

B o a rd o f
D ir e c to r s
(O w n e rs )

C h ie f E x e c u t iv e
O ffic e r
(C E O )

B u s in e s s U n it V .P . H u m a n V .P . In f o rm a tio n C h ie f F in a n c ia l
M anager R e s o u rc e s S e r v ic e s O ffic e r (C F O )

P la n t P la n t
M anager M anager

P la n t P la n t
A c c o u n ta n t A c c o u n ta n t
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 Information about decision-making
authority, for decision-making support, and Objectives
for evaluating and rewarding decision-making of
performance.
Managerial
Reporting
Information useful in assessing
both the past performance and future
directions of the enterprise and information
from external and internal sources.

Information useful to help the enterprise

achieve its goal, objectives and mission.

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 Characteristics
Characteristics of
of Management
Management
Accounting
Accounting Information
Information
Timeliness
Timeliness
Identify
Identify
AAMeans
Meanstoto Decision-
Decision-
an
anEnd
End Making
Making
Authority
Authority

Measures
Measuresof of Oriented
Oriented
Efficiency
Efficiencyand
and Toward
Toward
Effectiveness
Effectiveness Future
Future

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 Integrity
Integrity of
of Accounting
Accounting Information
Information
Institutional Features
Generally Accepted Accounting Principles
(GAAP)
Financial Accounting Standards Board
Securities and Exchange Commission
Internal Control Structure
Audits

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 Integrity
Integrity of
of Accounting
Accounting Information
Information
Professional Organizations
American Institute of Certified Public
Accountants
Institute of Management Accountants
Institute of Internal Auditors
American Accounting Association

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 Integrity
Integrity of
of Accounting
Accounting Information
Information
Competence, Judgment and Ethical Behavior
Certified Public Accountants (CPAs)
Certificate in Management Accounting (CMA)
Certificate in Internal Auditing (CIA)
Code of Professional Conduct

CP
A
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 End
End of
of Chapter
Chapter 11

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002