acts 202 chapter 14 – Flashcards

Area of accounting aimed mainly at serving the decision-making needs of internal users (Area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting.)

Area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting.

Area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting.

Area of accounting aimed mainly at serving the decision-making needs of internal users; also called management accounting.

Companies accumulate, process, and report financial accounting and managerial accounting information for different groups of decision makers. Financial accounting information is provided primarily to external users including investors, creditors, analysts, and regulators. External users rarely have a major role in managing a company's daily activities.

Investors, creditors, and other external users of financial accounting information must often decide whether to invest in or lend to a company. If they have already done so, they must decide whether to continue owning the company or carrying the loan. Internal decision makers must plan a company's future.

External users compare companies by using financial reports, and they need protection against false or misleading information. Thus, financial accounting relies on accepted principles that are enforced through an extensive set of rules and guidelines, or GAAP. Internal users need managerial accounting information for planning and controlling their company's activities rather than for external comparisons. Internal users require different types of information, depending on the activity and the type of organization.

Formal financial statements reporting past transactions and events are not immediately available to outside parties. Independent certified public accountants often must audit a company's financial statements before providing them to external users. Thus, because audits often take several weeks to complete, financial reports to outsiders usually are not available until well after the period-end. However, managers can quickly obtain managerial accounting information.

To protect external users from false expectations, financial reports deal primarily with results of both past activities and current conditions. While some predictions such as service lives and salvage values of plant assets are necessary, financial accounting avoids predictions whenever possible. In contrast, managerial accounting regularly includes predictions of conditions and events.

Companies often organize into divisions and departments, but investors rarely can buy shares in one division or department. Nor do creditors lend money to a company's single division or department.

Both financial and managerial accounting systems report monetary information. Managerial accounting systems also report considerable nonmonetary information. Monetary information is an important part of managerial decisions, and nonmonetary information also plays a crucial role, especially when monetary effects are difficult to measure.

Although there are differences between financial and managerial accounting, the two are not entirely separate. Some similar information is useful to both external and internal users. For instance, information about costs of manufacturing products is useful to all users in making decisions. Also, both financial and managerial accounting affect people's actions.

Fraud, and the role of ethics in reducing fraud, are important factors in running business operations. Fraud involves the use of one's job for personal gain through the deliberate misuse of the employer's assets. Examples include theft of the employer's cash or other assets, overstating reimbursable expenses, payroll schemes, and financial statement fraud.

Fraud increases a business's costs, and an important goal of managerial accounting is accurate cost information. Left undetected, inflated costs can result in poor pricing decisions, an improper product mix, and faulty performance evaluations. All of these can lead to poor financial results for the company.

All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest

A professional association of management accountants.

Product, process, department, or customer to which costs are assigned.

Costs incurred for the benefit of one specific cost object.

Costs incurred for the benefit of more than one cost object.

Costs that are capitalized as inventory because they produce benefits expected to have future value; include direct materials, direct labor, and overhead.

Expenditures identified more with a time period than with finished products costs; include selling and general administrative expenses.