Accounting: Text and Cases Managerial Accounting

Anthony, Hawkins and Merchant 13th Edition

Garrison, Noreen and Bewer 13th Edition

Management Accounting

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Chapter 15

The Nature of Management Accounting

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Learning Agenda
Describe the differences between financial and management accounting Measurement used in management accounting system Textbook problem exercises
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Differences Between Financial and Managerial Accounting
Financial Accounting
1. Users 2. Time focus 3. Verifiability versus relevance 4. Precision versus timeliness 5. Subject 6. Requirements External persons who make financial decisions Historical perspective Emphasis on verifiability Emphasis on precision Primary focus is on the whole organization Must follow GAAP and prescribed formats

Managerial Accounting
Managers who plan for and control an organization Future emphasis Emphasis on relevance for planning and control Emphasis on timeliness Focuses on segments of an organization Need not follow GAAP or any prescribed format

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Accounting Differences
Financial
External focus Whole organization Historical Quantitative Monetary Verifiable GAAP Formal recordkeeping

Managerial
Internal focus Segments or divisions Current/projected Quantitative/qualitative Monetary and nonmonetary Timely/reasonable estimate Benefits exceed costs Formal and informal recordkeeping
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Management vs. Financial accounting

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Financial Accounting : SEC (or banks or suppliers) requires publicly traded companies to publish financial statements according to GAAP/IAS.

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Management accounting is optional.

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Management vs. Financial accounting

Purpose
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Financial Accounting :
Produce financial statements for outside users.

• Management

Help managers plan, implement and control.