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AOF Managerial Accounting

Lesson 2What Is Managerial Accounting?

Teacher Resources

Resource Description

Teacher Resource 2.1 Presentation and Notes: Financial and Managerial Accounting (includes separate PowerPoint file)

Teacher Resource 2.2 Answer Key: Venn Diagram

Teacher Resource 2.3 Assessment Criteria: Managerial Accounting Vignette

Teacher Resource 2.4 Key Vocabulary: What Is Managerial Accounting?

Teacher Resource 2.5 Bibliography: What Is Managerial Accounting?

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AOF Managerial AccountingLesson 2 What Is Managerial Accounting?

Teacher Resource 2.1

Presentation Notes: Financial and Managerial Accounting

Before you show this presentation, use the text accompanying each slide to develop presentation notes. Writing the notes yourself enables you to approach the subject matter in a way that is comfortable to you and engaging for your students. Make this presentation as interactive as possible by stopping frequently to ask questions and encourage class discussion.

This presentation will describe the similarities and differences between financial accounting and managerial accounting.

How does a financial accountant benefit an organization? A managerial accountant helps executive teams:

• Plan for the future

• Run the business day to day

• Review the results of their decisions to see if they need to be adjusted

Presentation notes



Both managerial and financial accounting record and report financial information from business transactions.

Financial accounting reports information to tell people outside the business what they need to know about the company’s performance. Potential investors, for example, would want to know about a company’s earnings and profits.

Managerial accountants report information to tell people inside the business what they need to know to make good decisions. The purchasing manager, for example, would want to know if he or she is paying a lot more this year for stationery.

Presentation notes



Because financial accounting reports are used by those outside the company to help them evaluate performance, these reports are governed by stricter rules than managerial accounting reports. Financial accounting rules dictate standardized reporting methods so that companies are honest about their performance. Statements prepared for outside entities must use generally accepted accounting principles (GAAP) to make sure that the information being reported is reliable. GAAP is a widely accepted set of rules, conventions, standards, and procedures for reporting financial information. These rules were established by the Financial Accounting Standards Board. By adhering to GAAP, companies all report their results in the same way, making it easier for investors and watchdog agencies to find and analyze the information they need.

Financial accounting is mandatory—reports must be done. Outside parties such as the Securities and Exchange Commission (SEC) and the tax authorities require financial statements.

Financial reports are like a scorecard at the end of a game. They show the history of what the company did during a certain time period.

Presentation notes



Managerial accounting reports are not required by law. Executives and managers request reports that will give them the information they need to run the organization day to day.

In addition, managerial accounting reports are not required to follow GAAP. Managerial accounting is concerned with relevance—that is, they provide timely reports that relate to a specific business issue.

There are four major areas of managerial accounting that we will study during this course. They are:

• Planning and forecasting—creating goals and budgets, preparing for new product launches

• Cost accounting—compiling, analyzing, and improving the costs of manufacturing

• Tax accounting—considering the effects of tax rules and regulations on management decisions

• Internal auditing—examining accounting procedures and processes for accuracy, consistency, and compliance

Presentation notes



Financial accounting reports, as you’ve seen, give an overview of the entire organization. Although they don’t focus specifically on divisions or departments within a company, they are still used internally by managers to make business decisions.

All of the data for financial reports comes from the organization’s own accounting system.

Financial reports are completed as required by government agencies, such as tax authorities or the SEC. These reports are not optional―they are completed as required by outside agencies. Of course, companies can produce interim reports at any time based on their own needs.

Presentation notes



Reports are often generated for divisions, departments, or regions. For example, a theme park manager in St. Louis might want to know how many visitors were season pass-holders and how many bought day passes.

Managerial accountants use both financial and nonfinancial data. For example, managerial accountants may report the quantities of paper used to make greeting cards, the rate of defective products, or the number of delays that the light rail transit service had in one month.

The management team manages resources, activities, and people to achieve the organization’s goals. Because reports are done based on the needs of management, they are almost always completed or updated more frequently than financial reports.

Presentation notes



The information that accounting reports doesn’t change, no matter what purpose it is being used for or who is reviewing it. Financial and managerial accounting reflect two different ways to present a company’s information; the way the information is presented depends upon how the audience will use it. Financial accounting, because it is for the benefit of outsiders who are evaluating the company, is governed by GAAP rules. Managerial accounting, because it is for the benefit of company managers who wish to make good decisions, is governed by the needs of the company itself.

Together, financial and managerial accounting provide a complete picture of an organization’s financial health.

Presentation notes


Records, estimates, organizes, and summarizes financial informationProvides information for internal users in management to help them make business decisionsReports information to help with future decisions

Managerial AccountingDoes not follow GAAP

Focuses on parts of the business rather than the whole

Reports what management needs to seeCompiles reports as they’re needed



Answer Key: Venn Diagram


Financial Accounting Information for external users, such as

investors, lenders, tax authorities

Reports on past business

Follows GAAP

Reports information for the company as a whole

Prepares specific required reports

Compiles reports as they’re needed or required



Assessment Criteria: Managerial Accounting Vignette Student Name:______________________________________________________________

Date:_______________________________________________________________________

Using the following criteria, assess whether the student met each one.

Met Partially Met

Didn’t Meet

The vignette thoughtfully and accurately describes at least one way in which managerial accounting can help the student be successful in the job he or she described in the area of planning.

□ □ □

The vignette thoughtfully and accurately describes at least one way in which managerial accounting can help the student be successful in his or her job in the area of acting.

□ □ □

The vignette thoughtfully and accurately describes at least one way in which managerial accounting can help the student be successful in his or her job in the area of reviewing.

□ □ □

The vignette communicates an understanding of the role of managerial accounting in business. □ □ □The completed assignment is neat and legible and uses proper spelling, grammar, and punctuation. □ □ □

Additional Comments:

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________




Key Vocabulary: What Is Managerial Accounting?

Term Definition

accounting The theory and system of setting up, maintaining, and auditing the financial books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, and so forth.

financial accounting Reports that follow GAAP and provide a financial summary of an organization’s activities.

financial statement A statement of the financial position of a business on a specified date or for a period of time.

GAAP (generally accepted accounting principles)

A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, established by the Financial Accounting Standards Board.

managerial accounting A branch of accounting that provides financial information about a business to help managers make decisions.


http://www.investorwords.com/1943/Financial_Accounting_Standards_Board.html

http://www.investorwords.com/1943/Financial_Accounting_Standards_Board.html

http://www.businessdictionary.com/definition/information.html

http://www.investorwords.com/5572/financial.html

http://www.businessdictionary.com/definition/procedure.html

http://www.investorwords.com/4693/standard.html

http://www.businessdictionary.com/definition/convention.html

http://www.businessdictionary.com/definition/rule.html

http://www.businessdictionary.com/definition/set.html



Bibliography: What Is Managerial Accounting?The following sources were used in the preparation of this lesson and may be useful for your reference or as classroom resources.

PrintBrewer, Peter, Ray Garrison, Eric Noreen. Introduction to Managerial Accounting. New York: McGraw- Hill/Irwin, 2007.

Hilton, Ronald W. Managerial Accounting. New York: McGraw-Hill/Irwin, 2008.

Lee, Bill. Managerial Accounting. Mason, OH: South-Western, 2003.


Documents

Financial Accounting - NAF Curriculum - Homecurriculum.naf.org/packaged/assets/downloads/finance... · Web viewFinancial accounting reports information to tell people outside the