Accounting Roles and Functions in Business: Management Accounting vs. Financial Accounting, Study notes of Financial Accounting

Download Accounting Roles and Functions in Business: Management Accounting vs. Financial Accounting and more Study notes Financial Accounting in PDF only on Docsity! Disclaimer: These teaching notes are not intended to used as a substitute for the content of the text. They should also not be construed as encompassing the complete body of knowledge required for successful completion of this course. Chapter 1 Notes The Accountant’s Role in the Organization Definitions: 1. Management Accounting – provides information for management to make decisions. Measures, analyzes and reports financial and non-financial information. Applies to all types of businesses – manufacturing, merchandising and, service. 2. Financial Accounting – focuses on reporting to external parties such as investors, government agencies, banks, and suppliers. It measures and records business transactions based on GAAP. 3. Cost Accounting – measures, analyzes, and reports financial and non-financial information relating to the cost of acquiring and using resources in an organization. 4. Management vs. Financial Accounting – a. Purpose – Specific for decision making vs. general purpose for outsiders b. Users – Internal vs. external c. Focus – Future oriented vs. past oriented d. Rules of measurement – segments or units, relevant to operations vs. aggregated and in accordance with GAAP 1 of 7 11/29/2020 Disclaimer: These teaching notes are not intended to used as a substitute for the content of the text. They should also not be construed as encompassing the complete body of knowledge required for successful completion of this course. e. Type of reports – Internal reports as needed vs. F/S and quarterly and annual reports f. Behavioral – Impact on employee’s behavior vs. reporting of economic events that may be tied to compensation. 5. Strategy – specifies how an organization matches its own capabilities with the opportunities in the marketplace to meet objectives. 6. Strategic Cost Management – describes cost management that specifically focuses on strategic issues i.e. who are the most important customers, substitute products, critical resources, and adequacy of cash. Value Chain Analysis – refers to the sequence of business functions in which customer usefulness is added to products and services. a. Research and development – generating and experimenting with ideas related to new products, services or processes. b. Design of products, services, or processes – detailed planning and engineering of products, services, or processes c. Production – acquiring, coordinating, and assembling resources to produce a product or deliver a service. d. Marketing – promoting and selling products or services to customers or prospective customers. 2 of 7 11/29/2020 Disclaimer: These teaching notes are not intended to used as a substitute for the content of the text. They should also not be construed as encompassing the complete body of knowledge required for successful completion of this course. c. Feedback – involves managers examining past performance and exploring ways to make improvements or better informed decisions and plans in the future. Key Management Accounting Guidelines Cost-Benefit Approach – resources should be spent if they are expected to attain company goals in relation to the expected costs of those resources. Benefits from spending should exceed expected costs. Behavioral and Technical Considerations – behavioral considerations motivate managers and other employees to aim for goals of the organization. Technical considerations help managers make wise economic decisions by providing them with the desired information in appropriate format at a preferred frequency. Different Costs for Different Purposes – costs should be accumulated and reported in ways that will facilitate the decision making process of the end user. 7. Organizational Structure – Shows the interrelationships of activities and the delegation of authority and responsibility within the company. a. Centralized – vertical authority and responsibility b. Decentralized – horizontal authority and responsibility 5 of 7 11/29/2020 Disclaimer: These teaching notes are not intended to used as a substitute for the content of the text. They should also not be construed as encompassing the complete body of knowledge required for successful completion of this course. i. Line positions – directly involved in the company’s primary revenue generating activities. ii. Staff positions – involved in activities that support the efforts of the line employees. iii. Organizational charts – pictures of the line and staff relationships. c. Types of Positions -  Chief Financial Officer – responsible for all of the financial operations of the company.  Controller – responsible for the accounting records and financial reports to managers.  Treasurer – responsible for the custody of funds and maintaining cash position (banking, financing, investments, and cash management).  Internal audit Staff – Should report directly to the Board of Directors. Review the reliability and integrity of financial information and control systems that safeguard corporate assets. 8. Professional Ethics – Should be a corporate culture of integrity and honesty. All in the business should act ethically. 6 of 7 11/29/2020 Disclaimer: These teaching notes are not intended to used as a substitute for the content of the text. They should also not be construed as encompassing the complete body of knowledge required for successful completion of this course.  Proper incentives – realistic goals, adequate monitoring, and better performance evaluation.  Certifications – CMA (Certified Management Accountant) and CFM (Certified in Financial Management). Both have standards for ethical conduct o Competence o Confidentiality o Integrity o Objectivity  Sarbanes-Oxley Act of 2002 – (SOX) – top management must certify that the company maintains an adequate system of internal control, accurate financial reports or else there are severe penalties for misconduct. o Enron o WorldCom o Global Crossing 7 of 7 11/29/2020