Chapter 18 - Managerial accounting concepts and principles. After completing this chapter you should be able to: Explain the purpose and nature of, and the role of ethics in, managerial accounting, describe accounting concepts useful in classifying costs, define product and period costs and explain how they impact financial statements, explain how balance sheets and income statements for manufacturing and merchandising companies differ. | Chapter 18 MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES Chapter 18: Managerial Accounting Concepts and Principles Managerial accounting provides financial and nonfinancial information for managers of an organization and other decision makers. Financial accounting provides general purpose financial information to those who are outside the organization. MANAGERIAL ACCOUNTING BASICS C 1 Managerial accounting is an activity that provides financial and nonfinancial information to an organization’s managers and other internal decision makers. The main purpose of the financial accounting system is to prepare general purpose financial statements. The purpose of both managerial and financial accounting is providing useful information to decision makers. Both areas of accounting report monetary information, although managerial accounting includes the practice of reporting nonmonetary information. NATURE OF MANAGERIAL ACCOUNTING C 1 Here we see a detailed comparison of financial accounting and managerial accounting. In addition to the focus on internal decisions, note particularly that managerial accounting information may follow a flexible format, involves frequent, timely reports, and may contain more estimates and projections than financial accounting. Activity Cost Activity Cost TYPES OF COST CLASSIFICATIONS CLASSIFICATION BY BEHAVIOR Cost behavior refers to how a cost will react to changes in the level of business activity. Total fixed costs do not change when activity changes. Total variable costs change in proportion to activity changes. Mixed costs are combinations of fixed and variable costs. Activity Cost C 2 Cost behavior refers to how a cost will react to changes in the level of business activity. Total fixed costs do not change when activity changes. Total variable costs change in proportion to activity changes. Mixed costs are combinations of fixed and variable costs. Classification of costs by behavior is helpful in cost-volume-profit analyses and short-term . | Chapter 18 MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES Chapter 18: Managerial Accounting Concepts and Principles Managerial accounting provides financial and nonfinancial information for managers of an organization and other decision makers. Financial accounting provides general purpose financial information to those who are outside the organization. MANAGERIAL ACCOUNTING BASICS C 1 Managerial accounting is an activity that provides financial and nonfinancial information to an organization’s managers and other internal decision makers. The main purpose of the financial accounting system is to prepare general purpose financial statements. The purpose of both managerial and financial accounting is providing useful information to decision makers. Both areas of accounting report monetary information, although managerial accounting includes the practice of reporting nonmonetary information. NATURE OF MANAGERIAL ACCOUNTING C 1 Here we see a detailed comparison of financial accounting and
