Accounting 2: QuickStudy Laminated Reference Guide

ACCOUNTING FUNCTIONS

Accounting helps an organization to achieve its goals and objectivesby gathering, organizing, and communicating information about itsactivities

Two distinct accounting disciplines: Financial accounting and managerial accounting

Accounting 2 focus: Managerial accounting

Financial accounting

Concerned with the preparation of financial statements for decision makers and stakeholders such as stockholders, suppliers, creditors and banks, employees, government agencies, and customers

Suppliers provide products and services

Creditors and banks provide loans, leasing and other services

Employees provide time and effort

Governments provide permission to operate, municipal services, regulation, and protection

Customers provide cash

Managerial accounting

Concerned with providing accounting information to managers within organizations, allowing them to manage, make decisions, and perform control functions

Concerned with providing strategic information, supporting performance management, and risk management

Strategic management: The management accountant is a strategic partner in the organization

Performance management: The management accountant is a partner in developing the practice of business decision making and managing the performance of the organization

Risk management: The management accountant contributes to frameworks and practices for identifying, measuring, managing, and reporting risks to the accomplishment of organizational objectives

An accounting system uses three types of activities

Score keeping to accumulate and classify data

Attention directing to focus on problems and opportunities

Problem solving to recommend the best course of action

Accounting system design is guided by themes

Cost/benefit criteria

The benefits of information should outweigh the cost to generate and distribute the information

Weighing costs against benefits is done in all decisions

Behavioral implications; effects on the manager’s decision making

Accounting’s position in the organization can be both line and staff

Line authority: Downward over subordinates

Staff authority: Downward, laterally, or upward

Controller:

Top accounting officer in an organization; measures and reports on operating performance

Responsible for accounting records, internal controls, preparation of financials, tax returns, and internal reports

Accountants are expected to adhere to standards of ethical conduct

American Institute of Certified Public Accountants (AICPA): CPAs must adhere to professional ethical standards (www.aicpa.org)

Institute of Management Accountants: CMAs must adhere to ethical standards (www.imanet.org)

Ethical standards of Institute of Management Accountants:

Competence – maintain