chapter1

1. The Manager and Management Accounting

1.1 Introduction to Management Accounting

• Management accounting measures, analyzes, and reports financial and non-financial information.

• Aids managers in making informed decisions to achieve organizational goals.

• Does not require adherence to GAAP (Generally Accepted Accounting Principles).

1.2 Comparison of Management Accounting and Financial Accounting

• Purpose of Information

  • Management: Helps managers fulfill organizational goals.

  • Financial: Communicates financial position to external parties.

• Primary Users

  • Management: Internal managers.

  • Financial: External users (investors, regulators, banks).

• Focus and Emphasis

  • Management: Future-oriented (planning for future strategies).

  • Financial: Past-oriented (reported performance of past periods).

• Rules of Measurement and Reporting

  • Management: Internal reports do not follow GAAP; focus on cost-benefit analyses.

  • Financial: Must comply with GAAP and certified by external auditors.

• Time Span and Type of Reports

  • Management: Reports vary from hourly to projections of up to 20 years.

  • Financial: Typically annual and quarterly financial reports.

• Behavioral Implications

  • Management: Designed to influence the behavior of managers/employees.

  • Financial: Reports economic events, can influence manager compensation.