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Chapter 1

Accounting Information and

Managerial Decisions

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IntroductionDATA- Financial Statements, customer lists, inventory records, number and type of products or services sold.

INFORMATION - Data that have been organized, processed, and summarized.

KNOWLEDGE – Information that is shared and exploited so that it adds value to an organization.

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Introduction

DATA become INFORMATION when organized, processed, and

summarized, and information becomes KNOWLEDGE when it is

shared and exploited to add value to an organization.

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Accounting Information

Accounting information includes both financial and

nonfinancial information used by decision makers.

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Users of Accounting Information

ExternalStockholders

Potential InvestorsCreditors

Government AgenciesSuppliers

Customers

InternalEmployees

Employee TeamsDepartments

RegionsTop Management

Financial Accounting

Managerial Accounting

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Users of Accounting Information

The three primary activities of managers are planning, operating and controlling

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The Role of the Managerial Accountant

Managerial accountants facilitate management decision

making.

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The Information Needs of Internal and External

UsersInternal Users•More flexible•May be geared toward specific segments of a company•May be customized, less precise, and uses estimates frequently

External Users•Less flexible•Geared toward reports on company as a whole•Must meet requirements of SEC, GAAP, IRS

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A Decision-Making Model

Never make decisions with just the numbers!

Always consider nonnumerical (qualitative)

information.

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Enterprise Risk Management

•Every business faces risk and uncertainty

•Risk is often thought of in negative terms, but risk can provide opportunities•Businesses must identify and effectively manage risks