Summary ACC 241 Test 1 Study Guide.

Financial accounting is the periodic reporting of accounting for shareholders, government agencies and other parties external to the business to make inve stment and lending decisions. This information takes the form of financial statements: the balance sheet, income statement, statement of shareholders’ equity and statement of cash flows (and notes). Because the information is used for parties external to the business, rules are necessary to ensure consistency among various companies - this is referred to as GAAP (Generally Accepted Accounting Principles) or IAS (International Accounting Standards). On the other hand, management accounting focuses on providing internal management with information it needs to run the company effectively and efficiently. It is the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity. Managers Responsibilities: Planning- setting goal/objectives and identifying ways to achieve the objectives (example: budgets) Directing- overseeing day-to-day operations (example: uses of cost reports, sales reports, and to run daily business) Controlling- monitoring a plan’s implementation, feedback is information used to evaluate or correct implementation of a plan. Based on feedback, a manager might: continue the implementation as originally planned, take corrective action if needed, or modify the plan (example: performance reports, which are accounting reports that provide feedback by comparing actual results with plans) All of manager responsibilities are decision making. Management is continually making decisions while it plans, direct, and controls operations. Managerial accounting gathers, summarizes, and reports on the financial impact of these decisions. Differences between Managerial Accounting and Financial Accounting: