Which of the following accounting information is management accounting information:
Usage of Accounting InformationAccounting is the vehicle for reporting financial information about a business entity to many different groups of people. Show
Learning Objectives Explain the history of accounting and how accounting information is useful Key TakeawaysKey Points
Key Terms
Using Accounting Information The American Accounting Association defines accounting as "the process of identifying, measuring and communicating economic information to permit informed
judgements and decisions by users of the information." In other words, it is the process of communicating financial information about a business entity to stakeholders and managers. Economic information is generally displayed in the form of financial statements that show the economic resources that a business currently has; the goal of the business is to determine which information is useful to the outside world.
It is important to note that accounting is not the end of the decision making process; it provides the most relevant and reliable information possible to allow for goals to be developed, implemented, and revised. Accounting History Early accounts served mainly to assist a businessperson in recalling financial transactions. The proprietor or record keeper was usually the only person to see this information. Cruder forms of accounting were inadequate when a business needed multiple investors. As a result, double-entry bookkeeping first emerged in northern Italy in the 14th century, where trading ventures began to require more capital than a single
individual was able to invest. Accounting Today Today, accounting is referred to as "the language of business" because it is the vehicle for reporting financial information about a business entity to many different groups of people. Accounting that concentrates on reporting to people inside the business entity is called management accounting. It is used to provide information to employees, managers, and auditors. Management accounting is concerned primarily with providing a basis for making management or operating
decisions. Accounting: Accounting allows a business to track its financial information. Managerial AccountingThrough integrating accounting knowledge with strategic decision-making, organizations can improve performance, refine strategy, and mitigate risk. Learning Objectives Integrate a knowledge of accounting with its impact on strategic decision-making Key TakeawaysKey Points
Key Terms
Management accounting is one of the most interesting and broad-minded applications of the accounting perspective. There exists a strong relationship between the knowledge accounting delivers to managerial teams, and the strategic and tactical decisions made by management. Through this integration, organizations can improve their decision-making to strategic value in the form of improved performance and mitigated risks. Differentiating Managerial AccountingWhen looking at traditional financial accounting, managerial accounting differs in a few key ways:
Differences between Financial and Managerial Accounting: This is a great image depicting the various differences in perspective found between different accounting methodologies. Looking at managerial accounting in this diagram, one can better understand its place in the organization. Examples of Managerial Accounting There are countless specific examples of managerial accounting practices. Taking a look at a few will provide additional scope and perspective on the field: Financial AccountingFinancial accounting is a core organizational function in which accountants prepare a variety of documents to inform stakeholders of the financial health of operations. Learning Objectives List the various expectations of a financial accounting statement, along with the three common statements produced Key TakeawaysKey Points
Key Terms
The Role of Financial AccountingFinancial accounting focuses on the tracking and preparation of financial statements for internal management and external stakeholders, such as suppliers, investors, government agencies, owners, and other interest groups. These financial statements are consistent with accounting guidelines and formatting, particularly for publicly traded organizations. This allows individuals unfamiliar with day to day operations to see the overall performance, health, and relative profitability of a given organization. Characteristics of Financial AccountingGenerally speaking, it is expected by financial accounting standards that an organization maintain the following qualities when submitting financial accounting information:
How to Conduct Financial AccountingFinancial accountants are tasked with producing three primary documents that indicate a health check on various aspects (or at times all aspects) of the organization. These three statements are the balance sheet, the income statement, and the statement of cash flows. Balance Sheet A balance sheet demonstrates the overall value of organizational assets by listing current and long-term assets (fixed or otherwise) alongside short term and long term liabilities and stakeholder equity. Through balancing the assets against the combination of liabilities and stakeholder equity, the financial accounting should encounter a
zero sum game. Balance Sheet Example: This balance sheet demonstrates such common line items an account will be populated and measuring when creating and releasing this financial statement. Income Statement As opposed to something that balances, the income statement is more of a one directional document. Picture this as a mathematical illustration of the organizations operations, from the production floor all the way to the hands of the consumer. When organizations go through such a process (producing, shipping, storing, paying taxes, selling, providing service, etc.), the expectation is that the price point established will cover all relevant costs
while producing some percentage of net income. An income statement calculates whether or not a business is accomplishing this. Statement of Cash Flows The final statement is the statement of cash flows, which aims to identify how much capital in the organization is liquid (i.e. easily converted into spend). This is more of a chronological statement,
as it takes the previous pay period and the current pay period, and identifies the difference in overall available cash. Tax AccountingTax accounting couples legal obligations with financial accounting to ensure adherence to current tax laws. Learning Objectives Understand the role of tax accounting in both small and large organizations Key TakeawaysKey Points
Key Terms
Tax accounting is relatively simple to explain, though nuanced in execution. In short, every region has specific tax accounting rules and regulations. Adhering to these rules and regulations is critical to avoiding penalties and ensuring ethical behavior in the country (and/or state) of operation. Tax accounting is therefore a combination of legal and financial knowledge. The Financial Side Tax accountants act as the bridge between an organization's accounting team and the reporting bodies in the region. As a result, the primary role of a tax accountant is to understand the business' current operating status, distill profitability before tax, and report earnings. The Legal Side More tangibly, tax accounts will focus on the preparation, analysis,
and presentation of tax payments and tax returns at all times. There are specialized accounting principles and obligations for each area of operation which must be met. Keeping up to date on what is expected, and ensuring alignment on across the organization, is their primary responsibility. Various Accounting Perspectives: This image demonstrates the various responsibilities and perspectives of different forms of accounting (those being tax accounting, managerial accounting and financial accounting). Government and Nonprofit AccountingGovernmental and nonprofit accounting follow different rules from those of commercial enterprises. Learning Objectives Compare public vs. private accounting Key TakeawaysKey Points
Key Terms
Public Sector AccountingGovernmental accounting is an umbrella term which refers to the various accounting systems used by various public sector entities. In the United States, for instance, there are two levels of government which follow different accounting standards set forth by independent, private sector boards. At the federal level, the Federal Accounting Standards Advisory Board (FASAB) sets forth the accounting standards to follow. Similarly, there is the Governmental Accounting Standards Board (GASB) for state and local level government. Accounting: Governmental and Nonprofit accounting follow different rules to those of commercial enterprises. Public vs. Private Accounting There is an important difference between private sector accounting and governmental
accounting. The main reasons for this difference is the environment of the accounting system. In the government environment, public sector entities have differing goals, as opposed to the private sector entities' one main goal of gaining profit. Also, in government accounting, the entity has the responsibility of fiscal accountability which is demonstration of compliance in the use of resources in a budgetary context. In the private sector, the budget is a tool in financial planning and it is
not mandatory to comply with it.
The objectives for which government entities apply accountancy can be organized in two main categories:
The governmental accounting system has a different focus for measuring accounting than private sector accounting. Rather than measuring the flow of economic resources, governmental accounting measures the flow of financial resources. Instead of recognizing revenue when they are earned and expenses when they are incurred, revenue is recognized when there is money available to liquidate liabilities within the current accounting period, and expenses are recognized when there is a drain on current resources. Nonprofit OrganizationsNonprofit organizations generally use the following five categories of funds:
Consumers of Accounting InformationMost of a company's stakeholders consume its accounting information in one form or another. Learning Objectives Explain the history of accounting Key TakeawaysKey Points
Key Terms
Early accounts served mainly to assist the memory of the businessperson, and the audience for the account was the proprietor or record keeper alone. Cruder forms of accounting were inadequate for the problems created by a
business entity involving multiple investors, so double-entry bookkeeping first emerged in northern Italy in the fourteenth century, where trading ventures began to require more capital than a single individual was able to invest. A Sample Income Statement: Expenses are listed on a company's income statement. Licenses and AttributionsCC licensed content, Shared previously
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Which of the following describes management accounting information?MANAGEMENT ACCOUNTING (also called Managerial Accounting or Internal Accounting) - A field of accounting that provides economic and financial information for internal users, particularly the managers or decision makers in an organization. All the aforementioned management functions involve decision making.
What are the 4 types of accounting information?These four branches include corporate, public, government, and forensic accounting.
What are the 3 types of accounting information?A business must use three separate types of accounting to track its income and expenses most efficiently. These include cost, managerial, and financial accounting, each of which we explore below.
What kind of information does management accounting uses?Managerial accounting is the type of accounting that provides financial information to managers and decision-makers within a company. Managerial accounting often involves various financial metrics, including revenue, sales, operating expenses, and cost controls.
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