Chapter 15
Accounting information is divided into 2 types:
1. Financial
2. Managerial
Financial accounting: information is reported at fixed intervals in general-purpose financial
statements.
Financial statements:
- Income statement
- Retained earnings statement
- Balance sheet
- Statement of cash flows
Managerial accounting: information is designed to meet the specific needs of a company’s
management which includes:
- Historical data which provides objective measures of past operations
- Estimated data which provides subjective estimates about future decisions
The departments in a company can be viewed as having either of these:
- Line responsibilities
- Staff responsibilities
Line department: directly involved in providing goods or services to the customers of the
company. Individuals in this group are responsible for manufacturing and selling product of the
company.
Staff department: provides services, assistance and advice to the departments with the line and
other staff responsibilities. A staff department has no direct authority over a line department.
Controller: is the chief management accountant in most companies. The controller’s staff
consists of a variety of other acocuntants who are responsible for specialized accounting
functions.
, As a staff department, managerial accounting supports management and the management
process. The management process has 5 basic phases:
1. Planning
2. Directing
3. Controlling
4. Improving
5. Decision making
Planning
Management uses planning in developing the company’s objectives (goals) and translating
these objectives into courses of action.
Planning can be classified as follows:
- Strategic planning: developing long-term actions to achieve the company's objectives.
These long-term actions are called strategies which often involve periods of 5 to 10
years.
- Operational planning: develops short-term actions for managing the day-to day
operations of the company.
Directing
Directing: the process by which managers run day-to day operations.
Controlling
Controlling: monitoring operating results and comparing actual results with the expected end
results.
This feedback allows management to isolate areas for further investigation and possible
remedial action. It may also lead to revising future plans.
Management by exception: this philosophy of controlling by comparing actual and expected
results.
Improving
Feedback is also used by managers to support continuous process improvement.
Continuous process improvement: the philosophy of continually improving employees,
business processes and products. The objectives are to eliminate the soure of problems in a
process, so the right products are delivered and the right quantities at the right time.
Accounting information is divided into 2 types:
1. Financial
2. Managerial
Financial accounting: information is reported at fixed intervals in general-purpose financial
statements.
Financial statements:
- Income statement
- Retained earnings statement
- Balance sheet
- Statement of cash flows
Managerial accounting: information is designed to meet the specific needs of a company’s
management which includes:
- Historical data which provides objective measures of past operations
- Estimated data which provides subjective estimates about future decisions
The departments in a company can be viewed as having either of these:
- Line responsibilities
- Staff responsibilities
Line department: directly involved in providing goods or services to the customers of the
company. Individuals in this group are responsible for manufacturing and selling product of the
company.
Staff department: provides services, assistance and advice to the departments with the line and
other staff responsibilities. A staff department has no direct authority over a line department.
Controller: is the chief management accountant in most companies. The controller’s staff
consists of a variety of other acocuntants who are responsible for specialized accounting
functions.
, As a staff department, managerial accounting supports management and the management
process. The management process has 5 basic phases:
1. Planning
2. Directing
3. Controlling
4. Improving
5. Decision making
Planning
Management uses planning in developing the company’s objectives (goals) and translating
these objectives into courses of action.
Planning can be classified as follows:
- Strategic planning: developing long-term actions to achieve the company's objectives.
These long-term actions are called strategies which often involve periods of 5 to 10
years.
- Operational planning: develops short-term actions for managing the day-to day
operations of the company.
Directing
Directing: the process by which managers run day-to day operations.
Controlling
Controlling: monitoring operating results and comparing actual results with the expected end
results.
This feedback allows management to isolate areas for further investigation and possible
remedial action. It may also lead to revising future plans.
Management by exception: this philosophy of controlling by comparing actual and expected
results.
Improving
Feedback is also used by managers to support continuous process improvement.
Continuous process improvement: the philosophy of continually improving employees,
business processes and products. The objectives are to eliminate the soure of problems in a
process, so the right products are delivered and the right quantities at the right time.
