Three Sets of Books

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From the course by University of Virginia

Managerial Accounting Fundamentals

27 оценки

University of Virginia

Managerial Accounting Fundamentals

27 оценки

This course will teach you the fundamentals of managerial accounting including how to navigate the financial and related information managers need to help them make decisions. You'll learn about cost behavior and cost allocation systems, how to conduct cost-volume-profit analysis, and how to determine if costs and benefits are relevant to your decisions. By the end of this course, you will be able to: - Describe different types of costs and how they are represented graphically; - Conduct cost-volume-profit analyses to answer questions around breaking even and generating profit; - Calculate and allocate overhead rates within both traditional and activity-based cost allocation systems; - Distinguish costs and benefits that are relevant from those that are irrelevant for a given management decision; - Determine a reasonable course of action, given the financial impact, for a given management decision.

From the lesson

MANAGERIAL ACCOUNTING AND COST BEHAVIOR

Welcome to the course -- we're glad you're here! During this first week, we'll distinguish managerial from financial accounting, including the financial and related information managers need to help them make decisions. We'll then move on to cost behavior including different types of costs, their classifications, and how these classifications help with decision-making. From there, we'll show how to use a scatterplot and the high-low method to estimate cost functions. Let's get started!

What Is Managerial Accounting?1:39

Three Sets of Books3:01

Financial Versus Managerial Accounting2:38

Meet the Instructors

Luann J. Lynch
Almand R. Coleman Professor of Business Administration
Darden School of Business

Let's put managerial accounting in the larger context of accounting in general.

When you think of accounting in a broad sense, you can think of

three sets of books, the financial books, the management books, and the tax books.

An example of the financial books is the annual report that a company files with

its shareholders each year.

Examples of the management books include budget reports or

product profitability reports.

And an example of the text books would be the company's tax return it files for

income tax purposes each year with the tax authorities.

Each of these sets of books has its own audience and its own objective.

The financial books are targeted towards external constituents,

primarily investors and creditors.

These parties are trying to decide where to put their money, so

they rely on these to communicate financial information about the company.

The objective then, of those books, is to communicate the economic performance and

financial position of the organization.

The audience for

the management books is an internal audience, it's management themselves.

The objective of those books is to facilitate

management decision making in the organization.

The audience for the tax books is the tax authorities.

The tax books have the objective of facilitating the collection of tax revenue

by the government.

So each of these sets of books has very different objectives

targeted to very different audiences.

So we have three very different sets of books for all the right reasons.

Let's talk about the rules that companies have to follow when preparing each

set of these books.

The financial books must be prepared in accordance with some set of accounting

standards that are relatively common among a large group of firms.

For example, in the US, companies must prepare their financial statements in

accordance with US GAAP, or Generally Accepted Accounting Principles.

Internationally, companies may have to prepare their books in accordance with

International Financial Reporting Standards, or IFRS, or

a specific country GAAP.

Each of those has its own authority that sets the rules and

ensures that those rules are followed.

The management books essentially have no rules,

because management is the authority there and management pulls together that

information that's relevant to the decision that it is trying to make.

There are no standards that prescribe how management compiles that information.

And finally, the tax books are prepared in accordance with the tax code,

and of course that is enforced by the tax authority in the US,

that would be the IRS, or the Internal Revenue Service.

In this course, of course, we will focus on the management books.

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