Summary Chapter 19, 20 and 21 Accounting Principles
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Course
Accounting
Institution
Erasmus Universiteit Rotterdam (EUR)
Comprehensive summary of Chapters 19, 20 and 21 of the book Accounting Principles (12th edition). This material is among other things necessary for the midterm exam and the examination of the accounting profession (including Economics and Business Economics students). The summary contains clear lis...
Chapter 19: Managerial Accounting
1) Identify the features of managerial accounting and the functions of management.
Managerial accounting provides economic and financial information for managers and other
internal users. Each field of accounting (managerial/financial) deals with the economic evens
of a business. For example: determining the unit cost of manufacturing a product is part of
managerial accounting. Reporting the total cost of goods manufactured and sold is part of
financial accounting.
Manger’s activities and responsibilities can be classified into three board functions:
1. Planning: requires managers to look ahead and to establish objectives (such as
maximizing short-term profits and market share). Important is to add value to the
business under the managements’ control. Value is measured by the price fo the
company’s stock and by the potential selling price of the company.
2. Directing: involves coordinating a company’s diverse activities and human resources
to produce a smooth-running operation.
3. Controlling: is the process of keeping the company’s activities on track. In controlling
operations, managers determine whether planned goals are met.
Managers achieve control by using systems fo evaluation. These systems include such
features as budgets, and performance evaluation reports.
Note: Zie boek blz. 666 voor schema specifieke verschillen financial en managerial accounting.
Corporate organization chart:
This shows the interrelationships of activities
and the delegation of authority and
responsibility within the company.
Stockholders own the corporation, but they
manage it indirectly through a
board of directors they elect.
The board formulates the
operating policies for the
company and also selects
officers (such as (vice)president).
The board also executes policies and performs
daily management functions.
CEO (Chief Executive Officer) = has overall responsibility for managing the business.
Responsibilities within the company are classified as either line or staff positions. Employees
with line positions are directly involved in the company’s primary revenue-generating
activities. (Example line positions: vice president of marketing, supervisors). Exmployees
with staff positions are involved in activities that support the efforts of the line employees.
(Example staff positions: employees in finance, legal, human resources).
CFO (Chief Financial Officer) = is reponsible for all of the accounting and finance issues. The
CFO is supported by the controller and the treasurer.
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