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AOF Managerial Accounting

Lesson 2What Is Managerial Accounting?

Student Resources

Resource Description

Student Resource 2.1 Scenarios Activity: How Do Managers Use Managerial Accounting?

Student Resource 2.2 Note-Taking Guide: Venn Diagram

Student Resource 2.3 Reading: Financial and Managerial Accounting

Student Resource 2.4 Writing Assignment: Managerial Accounting Vignette

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AOF Managerial AccountingLesson 2 What Is Managerial Accounting?

Student Resource 2.1

Scenarios Activity: How Do Managers Use Managerial Accounting?

Student Name:_______________________________________________________ Date:___________

Managerial accounting helps managers accomplish their goals and make better decisions. It helps managers:

Plan: Create goals and budgets. Planning is future oriented.

Act: Carry out plans, hire people, manage the daily business. Acting is present oriented.

Review: Look at results to see if goals were met and plans need adjusting. Reviewing is past oriented.

Directions: Read the scenarios below. Then, using complete sentences, describe how accounting helped them perform their jobs.

Scenario OneJade is the sales manager for a health club. She is responsible for the planning and performance of all sales activities in the area. Jade’s goal is to direct the sales team to achieve maximum profitability and growth. She and her team work to expand the number of memberships the health club sells. Every year she has a sales goal, and she receives a bonus if she meets or exceeds it.

Jade believes that the head office is underestimating the value of the yoga and Pilates classes, which are very popular among the more affluent customers who tend to purchase day passes rather than yearly memberships. Jade asks the accounting department for a special report so she can look at daily breakdowns. From the breakdowns, she can see that day visits spike sharply on days when Pilates is offered. Jade determines that she should increase the number of yoga and Pilates classes and sell special annual memberships for guests who are only interested in those gym services.

Did accounting help Jade plan, act, or review, or did it help with a combination of these? Explain.



Scenario TwoKyle is the production manager in a plant that manufactures organic snack foods. The company has decided to introduce a new product—a chocolate walnut bar. He must make sure the new bar is cost-effective, produced on time, and of good quality. Kyle also makes sure the plant has the right equipment and materials to make the bar. Supervising the plant staff is also part of Kyle’s job.

Kyle asks the accounting department to run a report that has the information he needs to analyze the cost of buying versus leasing new equipment. Additionally, in order to help his boss determine optimal pricing of the new bar, Kyle orders and reviews a report that tells him exactly what it will cost to produce each unit. Kyle also uses a report on quality control when he sets goals for his staff for the upcoming months.

Did accounting help Kyle plan, act, or review, or did it help with a combination of these? Explain.

Scenario ThreeDevin is the human resources manager at an advertising agency. She plans the department staffing and training. Her responsibilities also include counseling managers about employment policies. Devin may be called on to investigate discrimination and harassment claims. She administers the budget for her department and monitors expenditures. Part of Devin’s performance evaluation is based on whether she stays within her budget.

Devin needs to forecast her annual budget. As she goes through the year, Devin requests monthly reports so she can see her expenses. At the end of the year, she takes a look at the year-end financial statements so that she can look back and see how her department did against her original objectives.

Did accounting help Devin plan, act, or review, or did it help with a combination of these? Explain.




Note-Taking Guide: Venn DiagramStudent Name:___________________________________________________ Date:______________

Directions: Write down activities that apply only to financial accounting in the top circle and activities that apply only to managerial accounting in the bottom circle. If any activities apply to both, write them in the


Financial Accounting

Managerial Accounting


section of the circles that overlap.




Reading: Financial and Managerial Accounting

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



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.



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.



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



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.



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.



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.




Writing Assignment: Managerial Accounting VignetteStudent Name:_______________________________________________________ Date:___________

Directions: A vignette is a short sketch or literary description. Answer the questions below and use your notes and rough answers to write an imaginative vignette about a job you would like to have one day and how you will use managerial accounting to be successful in your role. Read through this assignment sheet before you begin, and ask your teacher to explain anything you don't understand.

Imagine a job that you would like to have, either now or in the future. What is your title?

What are your responsibilities?

What would you do each day or each week? For example, do you interact with customers or work in an office? Do you manage others? Are you self-employed?

Keep in mind that managerial accounting can help managers in three areas: planning, acting, and reviewing. In what ways will you use managerial accounting in each of these areas in order to accomplish your goals and make better decisions? If you need help in remembering exactly what falls under each of these categories, refer to the top of Student Resource 2.1, Scenarios Activity: How Do Managers Use Managerial Accounting?

Now, using the answers above as a guide, begin to craft the paragraphs that will make up your vignette. If you run out of room, you can use the back of this assignment sheet. When you have a rough draft, take a separate sheet of paper and write your final vignette to turn in for assessment.

Make sure your vignette meets or exceeds the following criteria: The vignette thoughtfully and accurately describes at least one way in which managerial

accounting can help you be successful in the job you’ve described in the area of planning.

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

The vignette thoughtfully and accurately describes at least one way in which managerial accounting can help you be successful in your 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.


Documents

Financial Accountingcurriculum.naf.org/packaged/assets/downloads/finance... · Web viewFinancial and managerial accounting reflect two different ways to present a company’s information;