Scenario: You were recently hired as a management accountant for a medium-size manufacturing firm. From your interview, you remember that the CEO does not have a lot of knowledge in the management accounting area and was convinced to hire you only after getting some stern warnings from his board of directors. The company has been plagued by continued issues with below-target profitability, selling prices that seem out-of-sync with the firm's competitors, and a lack of any kind of responsibility for adverse budget performance.
Managerial Accounting Practices:
Task Name: Phase 1 Individual Project
Deliverable Length: 5 paragraphs ]
Details: During your first week on the job, the CEO asked you to prepare a report of the kinds of activities you will be involved in to specifically help him better monitor and control the company's financial performance. As he has some background in financial accounting, and how to analyze financial statements, he asked you to contrast financial accounting with management accounting.
Prepare a report that:
- compares and contrasts management and financial accounting along at least 4 different criteria.
- discusses how management accounting could specifically help the CEO control the company's performance.
- recommends how you would establish responsibility centers in the company so that specific managers can be held responsible for specific budget vs. actual spending performance.
- at least 3 internal measures of company's performance that, if put in place, would allow the CEO to better monitor the company's performance.
-explains how each of these 3 internal performance measures could be linked to the kinds of metrics or ratios that external users of accounting information would be reviewing.
Differences between the financial accounting and managerial accounting:
1. Financial accounting deals with the preparation of financial reports meant for external users like shareholders, banks and financial institutions, Governmental agencies, brokers in the financial markets, creditors, investors and the public in general. On the other hand, management accounting deals with the preparation of reports for the internal use by the management of the organization.
2. Financial accountants follow the Generally Accepted Accounting Principles set by the professional body of the respective country. On the other hand, management Accountants follow the procedures not set by those professional bodies.
3. Financial reports are prepared by the financial accountants for the particular fiscal period say one year. However, managerial accounting reports are prepared on daily, weekly or monthly basis.
4. Managerial accounting reports are future oriented. On the other hand, financial accounting reports are based on the historical information.
Discusses how management accounting could specifically help the CEO control the company's performance.
Reports generated by management accountant are product cost statement, capital expenditure statement, ...
In about 750 words, this response details this subject of managerial accounting, comparing it to financial accounting and also prepares a report describing how financial statements need to be analyzed by managing accounting firms.