Managerial Accounting – 15th Edition
Book PrefaceManagerial Accounting – 15th Edition
“Creating value through values” is the credo of today’s management accountant. It means that management accountants should maintain an unwavering commitment to ethical values while using their knowledge and skills to influence decisions that create value for organizational stakeholders. These skills include managing risks and implementing strategy through planning, budgeting and forecasting, and decision support. Management accountants are strategic business partners who understand the financial and operational sides of the business. They not only report and analyze financial measures, but also nonfinancial measures of process performance and corporate social performance. Think of these responsibilities as profits (financial statements), process (customer focus and satisfaction), people (employee learning and satisfaction), and planet (environmental stewardship).
What Is Managerial Accounting?
Many students enrolled in this course will have recently completed an introductory financial accounting course. 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. Exhibit 1–1 summarizes seven key differences between financial and managerial accounting. It recognizes that the fundamental difference between financial and managerial accounting is that financial accounting serves the needs of those outside the organization, whereas managerial accounting serves the needs of managers employed inside the organization. Because of this fundamental difference in users, financial accounting emphasizes the financial consequences of past activities, objectivity and verifiability, precision, and companywide performance, whereas managerial accounting emphasizes decisions affecting the future, relevance, timeliness, and segment performance. A segment is a part or activity of an organization about which managers would like cost, revenue, or profit data. Examples of business segments include product lines, customer groups (segmented by age, ethnicity, gender, volume of purchases, etc.), geographic territories, divisions, plants, and departments. Finally, financial accounting is mandatory for external reports and it needs to comply with rules, such as generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), whereas managerial accounting is not mandatory and it does not need to comply with externally imposed rules.
As mentioned in Exhibit 1–1 , managerial accounting helps managers perform three vital activities— planning, controlling, and decision making. Planning involves establishing goals and specifying how to achieve them. Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Decision making involves selecting a course of action from competing alternatives. Now let’s take a closer look at these three pillars of managerial accounting.
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|January 21, 2016|
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