Accounting Information and Managerial Decisions

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Chapter 1

• Accounting Information and Managerial Decisions

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Accounting Information Contents
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Users of Accounting Information
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Decision-Making Role
Planning Short-term / operational Long-term /
strategic Identify resources needed to achieve
goals
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Decision-Making Role
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Decision-Making Role
Controlling Are we attaining the organizations
goals? Are we motivating employees? Are we
comparing actual outcomes to planned outcomes?
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The Role of the Managerial Accountant
Key Concept Managerial accountants facilitate
management decision making.
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Todays Management Accountants

• Interpret financial information and explain the
  business implications to managers.
• Work with managers to make informed business
  decisions.
• (Siegal and Kuleza, 1996, IMA)

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The Role of the Managerial Accountant
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Accounting Information Needed by Internal vs.
External Accountants
More flexible Geared to specific
company Generally not regulated SEC, GAAP, IRS
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Accounting Information Needed by Internal vs.
External Accountants
Forward-looking, emphasizing the future rather
than the past More timely, may sacrifice accuracy
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How Did You Decide?
What college to attend? Which big item to
purchase? Whether to accept a summer job? Whether
to join a particular group?
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Decision Making
The process of identifying different courses of
action and selecting one decision appropriate to
a given situation.

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A Four-Step Decision-Making Model
Step 1 Define the Problem
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The Decision-Making Model
Pause and Reflect In retrospect, should you have
considered other options and variables when
making your most recent big purchase?
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The Decision-Making Model
Step 2 Identify Objectives
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The Decision-Making Model
Step 3 Identify and analyze available options
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The Decision-Making Model
Step 4 Select the best option
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The Decision-Making Model
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Relevant Factors and Decision Making
Sunk Costs Costs that have already been
incurred. Sunk costs are not relevant.
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Relevant Factors and Decision Making
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Relevant Factors and Decision Making
Opportunity Costs The benefits foregone by
choosing one alternative over another. Opportunity
costs are relevant.
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Ethics and Decision Making
Concept Question What ethical responsibilities
does a company have to its shareholders,
employees, customers, and the communities in
which it is located?
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Ben and Jerrys Mission Statement
Three Interrelated Parts Product make,
distribute and sell finest quality all-natural
ice cream Economic operate company on sound
financial basis of profitable growth Social
initiating innovative ways to improve the quality
of life of a broad community
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Ethics and Decision Making
Pause and Reflect Is adhering to laws and
regulations sufficient to ensure ethical behavior
in organizations?
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Standards of Ethical Conduct for Practitioners of
Management Accounting and Financial Management
Standards of Ethical Conduct Competence Confidenti
ality Integrity Objectivity Resolution of Ethical
Conflict Institute of Management Accountants
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End of Chapter 1
What decision will you make today?