1.1 MANAGERIAL ACCOUNTING - swlearning.com

1 Nintendo of America, Inc., based inRedmond, WA, is a wholly-owned sub-sidiary of Nintendo Co., Ltd., of Kyoto,Japan. It manufactures and marketshardware and software for its homevideo game systems. More than 40%of households are estimated toown a Nintendo game system. Thecompany is famous for the gamesMario, Donkey Kong, and Managers at Nintendoestablish policies and procedures forcash management, investments, andexpense reporting. They design andimplement ACCOUNTING procedures andprovide financial information andanalysis services. Finance Managersneed knowledge of generally acceptedaccounting principles. They must pos-sess excellent communication, timemanagement, and organizational need to be able to summarizeand analyze large amounts of data,work under pressure, and handle mul-tiple projects and deadlines. Applicantsshould have experience in treasury,marketing, or advertising and anundergraduate degree in ACCOUNTING ,finance, or a related job responsibilities of FinanceManagers interest you the most?

2 Why? do you think Finance Managersat Nintendo need to have marketingor advertising experience? INCOME BALANCE SHEETMANAGERIAL ACCOUNTINGNINTENDO OFAMERICA, Accountingand Financial StatementsPROJECT OBJECTIVES Identify the skills and abilities required for success in MANAGERIAL ACCOUNTING Demonstrate the ability to create and analyze an income statement Demonstrate the ability to create and analyze a balance sheetGETTING STARTEDRead through the Project Process below. Make a list of any materials you willneed. Decide how you will get the needed materials or information. Form small groups and make a list of the following departments that may befound in a typical merchandising business:SalesMarketingHuman ResourcesAdvertising AccountingMIS Add columns to your list for Personal Skills and ACCOUNTING -Related Skills Create a fictitious corporation that sells merchandise. Use spreadsheet soft-ware to create an income statement and balance sheet for the business.

3 Useformulas for all calculations. Be sure to add component PROCESSPart 1 LESSON in class the personal and account -related skillsneeded for workers in each department. Add them to your 2 LESSON columns to the income statement for the next yearand copy the current year s results into the new columns. Make changesto the next year s figures to show the effects of improved operations. Part 3 LESSON columns to the balance sheet for the next year andcopy the current year s results into the new columns. Make changes tothe next year s figures to show the effects of improved REVIEWP roject Wrap-upHold a class debate on the following statement or a similarone: All employees of a business should be concerned with the results reportedon the business s financial statements. As a class, evaluate the debate andcome to a consensus on the Chapter 1 video forthis module introduces theconcepts in this OF ACCOUNTING4 LESSON ACCOUNTINGEXPLAINthe differencebetween financialaccounting and MANAGERIAL accountingINDENTIFYthe education, skills, andabilities required for acareer in managerialaccountingBusinesses buy and sell goods and services for cash or credit.

4 They buy landand build offices, stores, and factories. They buy supplies, equipment,merchandise to sell, and raw materials to manufacture goods. They hireemployees and pay salaries and benefits. All of these activities need to be measured, analyzed, and is the set of procedures used to analyze, measure, and recordthe activities of a business. For this reason, ACCOUNTING is often called the language of business. There are two main types of ACCOUNTING : financialaccounting and MANAGERIAL Mitchell is a first-year college student pursuing a degree in is only interested, however, in ACCOUNTING and math courses. When heradvisor told her that her program also requires courses in most other businesssubject areas, as well as in communications, she questioned the relevance ofthose courses to her career choice of MANAGERIAL ACCOUNTING . Why would nonac-counting courses be important for a career as a MANAGERIAL accountant?CHAPTER 1 WHAT IS MANAGERIAL ACCOUNTING ? ACCOUNTINGFINANCIAL ACCOUNTING Financial ACCOUNTING uses generally accepted ACCOUNTING principles (GAAP)to record the activities of a business and to report the results of a business soperations.

5 Every transaction that occurs is recorded as an entry in a kind of activity has an account in a general ledger, and the journalentries are subsequently sorted by posting them to a general ledger , the balances in the general ledger accounts are used to preparefinancial statements, such as an income statement and balance people, both inside and outside the business, use financial state-ments. Managers use financial statements to establish how well the business isperforming, to determine what the business is worth, and to make institutions examine financial statements to learn about the busi-ness s debts and profitability when deciding whether to lend money to thebusiness. Investors analyze financial statements to determine whether a busi-ness would be a good investment. Regulatory agencies, such as the Securitiesand Exchange Commission, may examine financial statements to determinecompliance with regulations. Competitors may compare a business s financialstatements to their own or analyze financial statements to gain a competitiveadvantage.

6 Industry organizations may use financial statements to compileinformation about the industry, which then may be published in journals orotherwise ACCOUNTING The focus of MANAGERIAL ACCOUNTING is on the decisions made by the man-agers of a business. MANAGERIAL ACCOUNTING organizes ACCOUNTING informationto help plan and operate a business. There are two primary differencesbetween financial ACCOUNTING and MANAGERIAL , MANAGERIAL ACCOUNTING is concerned only with decisions made withinthe business. Therefore, people outside the business are not the audience formanagerial ACCOUNTING information. Instead, MANAGERIAL ACCOUNTING providesinformation for people inside the business to use in making , MANAGERIAL ACCOUNTING does not necessarily follow generallyaccepted ACCOUNTING principles. Instead, MANAGERIAL ACCOUNTING involvespreparing the information that is most needed for making a particular deci-sion. The type and form of the information varies with the decision to bemade.

7 MANAGERIAL ACCOUNTING is used for making decisions such as Setting prices Determining the cost of manufacturing an item Granting credit to customers Managing the amount of inventory on hand Introducing a new product Building a new factory Leasing or buying equipment Financing an investment Projecting revenues and costsIn a group, brainstormto produce a list ofbusinesses and theproducts or servicesthey 1 WHAT IS MANAGERIAL ACCOUNTING ? Determining the level of sales needed to break even Deciding the best sales mix for various products Estimating amounts on budgets Setting goals for a businessTYPES OF MANAGERIAL ACCOUNTING MANAGERIAL ACCOUNTING involves advising and supporting decision makers atall levels of an organization and providing control mechanisms to ensure thata company meets its goals. There are four major areas of MANAGERIAL account -ing: management planning and forecasting, cost ACCOUNTING , tax ACCOUNTING ,and internal Planning and ForecastingEffective businesses setgoals for the business and create a business plan in the form of a are created for every aspect of a business and are based on estimatesof planned future performance.

8 Many different departments and managersparticipate in creating a budget, and a MANAGERIAL accountant may advisethese managers as well as compile a final master budget. Individual managersusually need assistance in estimating costs and results to make sure the bud-gets are as accurate as possible. Individual projects, such as a new productlaunch, may also have their own budgets. MANAGERIAL accountants analyze thecosts and results of alternative plans to help managers choose the best plans. Cost AccountingCost ACCOUNTING usually applies to a manufacturingcompany and involves compiling and analyzing the costs of ACCOUNTING may deal with actual products currently being manufacturedas well as with proposals for manufacturing new products. Managerialaccountants may suggest ways to lower the costs of AccountingTax ACCOUNTING considers the effects of tax rules andregulations on management decisions. Taxes frequently make one decisionmore cost-effective than AuditingAuditors examine the ACCOUNTING procedures andprocesses of a business for accuracy, consistency, and compliance.

9 Externalauditors are independent of a business and examine the business s financialstatements. External auditors are concerned about compliance with generallyaccepted ACCOUNTING principles. Internal auditors, however, are employees of abusiness who examine the control structures of the business, such as the bud-get and expenditures, as well as the efficiency of the business s , internal auditors are MANAGERIAL than one millionpeople are employed as accountants in theUnited States. Ten percent are self-employed and 25 per-cent work foraccount-ing, auditing, orbookkeeping are the two main differences between financial ACCOUNTING andmanagerial ACCOUNTING ?CAREERS IN MANAGERIAL ACCOUNTINGB ecause businesses today are concerned about efficiency of operations, thedemand for MANAGERIAL accountants is high. Also, the career path of amanagerial accountant often leads to executive REQUIREMENTS MANAGERIAL ACCOUNTING positions generally require a college education inaccounting.

10 In addition to specialized courses in ACCOUNTING , a broad back-ground in all business subjects is valuable because a MANAGERIAL accountantadvises managers in all areas of business. For example, a sales manager mightneed to know the costs of additional sales representatives; a fleet managermight want to compare the costs of leasing and buying company cars; and anadvertising or marketing manager might need to know what percentage of aproduct s selling price would be available for an advertising accountants in a particular industry also must quickly learn thecharacteristics of the industry in which they are working and grasp the natureof the competition within the SKILLS AND ABILITIES As with any profession, in addition to formal education, certain skills andabilities are necessary to be successful. People SkillsManagerial accountants must work closely with managerswithin an organization. Often a MANAGERIAL accountant s analysis conflictswith a manager s decision, such as when a certain promotional plan costsmore than the additional profit on the sales it will generate.