Managerial Accounting

Managerial Accounting

Use the Library, the Internet, and your readings for the unit to research on the discussion topics below.

Define managerial accounting; how is it different from financial accounting? How is managerial accounting similar to financial accounting?

For each of the following managerial accounting techniques, provide an example of a business situation that would benefit from the use of the technique:

• Break-even analysis
• Budgeting
• Balanced scorecard

Just do response each posted # 1to 3 down below only

Posted 1

In general, financial accounting refers to the aggregation of accounting information into financial statements, while managerial accounting refers to the internal processes used to account for business transactions. (Accountingtools.com 2018)

To be blunt, a similarity of the two would be that they both provide useful information. The other side of that blunt statement however is as follows:

The Financial Accounting Standards Board states that the purpose of financial accounting and reporting is to provide information to existing and potential investors, lenders and creditors so they can make informed decisions about lending or buying and selling equity and debt instruments. (bizfluent.com 2017)

Managerial accounting, on the other hand, seeks to provide relevant information to internal company managers so they can make decisions about how to better run the company. In this sense, financial accounting focuses on the needs of outside stakeholders and managerial accounting focuses on the needs of internal users. (bizfluent.com 2017)

break-even analysis: I feel would be best utilized when making decisions on the future of the company or in better terms the direction the company will be taking.

Budgeting: I feel would be best because having the ability to fully gauge expenses and every aspect of the finances should keep the company on track for expansion and allows for clearer visual as to where the funds are going.

Balanced Scorecard: A balanced scorecard is a performance metric used in strategic management to identify and improve various internal functions of a business and their resulting external outcomes. It is used to measure and provide feedback to organizations. (investopedia.com 2019)

Posted 2

Hello Class and Instructor

Define managerial accounting; how is it different from financial accounting? How is managerial accounting like financial accounting?

Financial accounting refers to the aggregation of accounting information into the financial statement. Whereas managerial accounting deals with the internal processes used for business transactions., They are several differences, such as aggregation, efficiency, proven information, report focus, standards, systems, time period, timing, and valuation. Similarities of both present the general health of a company, and both allow the readers to make conclusions and decisions that must be made for the company.

For each of the following managerial accounting techniques, provide an example of a business situation that would benefit from the use of the method:

• Break-even analysis is useful for introducing new product lines, a change in sales price on products, or entering a new market area.
• Budgeting can be used for analyzing the profitability of two products, which involve estimating the amount of overhead to be assigned to each product line.
• The balanced scorecard is used in companies to attain a more comprehensive view of company operations.

References:

Bragg, S. (2018). The Difference Between Financial and Managerial Accounting. Accounting CPE Courses and Books. Retrieved from the internet: https://www.accountingtools.com/articles/what-is-the-difference-between-financial-and-managerial-acco.html

Posted 3

Hello Classmates and Professor,

Break-even analysis: A key relationship in CVP analysis is the level of activity at which total revenues equal to total costs (both fixed and variable). This level of activity is called the break-even point. At this volume of sales, the company will realize no income but will suffer no loss. The process of finding the break-even point is called break-even analysis. Knowledge of the break-even point is useful to management when it decides whether to introduce new product lines, change sales prices on established products, or enter new market areas. Sales = Variable Cost + Fixed Cost + Net income. Identifying the break-even point is a special case of CVP analysis. Because at the break-even point net income is zero, break-even occur where total sales equal variable costs plus fixed costs. The computation of Break-even Point (in units) as follows: Break -even point (in units) = Fixed Costs/Contribution margin per units. Break-even point (in Dollars) = Fixed Costs/ Contribution margin Ratio

b) Budgeting: A budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms. The role of budgeting as a control device in budgetary control. The budget is an important tool for evaluating performance.

c) Balanced Score card: Many companies now use a broad-based measurement approach, called the balanced scorecard, to evaluate performance. The balanced scorecard incorporates financial and nonfinancial measures in an integrated system that links performance measurement and a company’s strategic goals. The balanced score card evaluates company performance from a series of perspectives. The four most commonly employed perspectives are 1.The financial perspective 2. The customer perspective 3. The internal process perspective 4. The learning and growth perspective. d) Capital budgeting: The process of making such capital expenditure decisions is referred to as capital budgeting. Capital budgeting involves choosing among various capital projects to find the one(s) that will maximize a company’s return on its financial investment. Capital budgeting techniques that recognize the time value of money involve discounting cash flows. Discounted cash flow methods are used in making capital budgeting decisions.