Accounting Information and Managerial Decisions Chapter 1 Accounting Information and Managerial Decisions

Introduction DATA- 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.

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.

Accounting Information Accounting information includes both financial and nonfinancial information used by decision makers.

Users of Accounting Information Financial Accounting Managerial Accounting External Stockholders Potential Investors Creditors Government Agencies Suppliers Customers Internal Employees Employee Teams Departments Regions Top Management

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

The Role of the Managerial Accountant Managerial accountants facilitate management decision making.

The Information Needs of Internal and External Users Less flexible Geared toward reports on company as a whole Must meet requirements of SEC, GAAP, IRS Internal Users More flexible May be geared toward specific segments of a company May be customized, less precise, and uses estimates frequently

A Decision-Making Model Never make decisions with just the numbers! Always consider nonnumerical (qualitative) information.

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