ACCT 2301 Ch. 1

External parties

investors, creditors, IRS, and other government authorities that use the information for making decisions (i.e invest/lend) about the company.

Internal users

managers within the company who use information for day-to-day operating decisions and for long-range strategic planning.

Financial accounting

Provide financial information about the firm to shareholders, lenders, and other creditors that is useful in making decisions about providing resources to the firm.

Providing periodic financial statements.

Must follow the GAAP, which are the rules of accounting.

Applies only to businesses that trade on the US stock exchange.

Managerial accounting

Used to make critical business decisions

Goal: to provide financial and nonfinancial information to management that is useful in assisting management in the planning, directing, and controlling of a firm's strategy.

Partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control.

Service firms, merchandising, and manufacturing.

Planning

Setting goals/objectives

Directing

Run day-to-day business operations

Controlling

Evaluating results

Controller/Comptroller in a gov. org./Chief Accounting Officer

The top accounting officer. They are responsible for cost (managerial) accounting, financial reporting, tax reporting, and accounting information systems.

Treasurer

The top financial officer, Duties include:

provision of capital (issuance of stock and bonds), short-term financing, banking and custody, investor relations, investments, credit and collections, and risk management (Insurance).

Sarbanes-Oxley Act

Passed in 2002 as a result of corporate securities fraud and corporate misconduct. (e.g., Enron, WorldCom, and Adelphia)

Established the Public Company Accounting Oversight Board (PCAOB)

Enhanced Auditor independence (now work through the Audit Committee)

Tightened regulation of corporate governance

Control over Management

Company & their auditor must test the firm's internal controls. SOX has led to increased attention to corporate ethics and now holds the CEO & CFO accountable.

Sustainability

The "Triple Bottom Line": People, Planet, Profit.

Takes into consideration the company's social responsibility

3 Pillars of Sustainability: Social, Environmental, Economic

"Do unto others, including future generations, as you would have done unto you."

Which of the following are a manager's three primary responsibilities?

Planning, directing, and controlling.

The individual responsinble for managing all of the financial aspects of the organization is?

CFO

Which of the following skills are required of management accountants?

A. Knowledge of both financial and managerial accounting

B. Knowledge of how a business functions

C. Oral and written communication skills

Ethical principles identified in the IMA's statement of ethical professional practice

Honesty, objectivity, and responsibility.