You Have Recently Hired A New Assistant Susan Thompson

You have recently hired a new assistant, Susan Thompson, who previously worked in a financial accounting office preparing journal entries, which provide you with a recording of the day-to-day activities of the company and financial statements (income statement, statement of owners' equity, balance sheet, and cash flow statement). Although your new assistant has experience with and fully understands financial accounting, she has no experience with managerial accounting. Part 1: In a memo to your new assistant, Susan Thompson, complete the following: Explain to her the similarities and differences between financial and managerial accounting. Provide examples of managerial accounting reports that she could expect to see within EEC, and explain how management might use the information to make decisions. Keep in mind that although the income statement, the statement of owners’ equity, balance sheet, and cash flow statement are generated in financial accounting, they are used to develop all of your managerial accounting reports. Examples of a few of those reports are horizontal analysis, vertical analysis, and ratios. Part 2: In a memo to the board of directors, discuss the information found in each of the following financial statements, and describe how accounting information is used by managers for planning and control: balance sheet, income statement, statement of cash flows, statement of stockholders’ equity.

You Have Recently Hired A New Assistant Susan Thompson Who Previousl

You have recently hired a new assistant, Susan Thompson, who previously worked in a financial accounting office preparing journal entries, which provide you with a recording of the day-to-day activities of the company and financial statements (income statement, statement of owners' equity, balance sheet, and cash flow statement). Although your new assistant has experience with and fully understands financial accounting, she has no experience with managerial accounting.

Part 1: In a memo to your new assistant, Susan Thompson, complete the following: Explain to her the similarities and differences between financial and managerial accounting. Provide examples of managerial accounting reports that she could expect to see within EEC, and explain how management might use the information to make decisions. Keep in mind that although the income statement, the statement of owners’ equity, balance sheet, and cash flow statement are generated in financial accounting, they are used to develop all of your managerial accounting reports. Examples of a few of those reports are horizontal analysis, vertical analysis, and ratios.

Part 2: In a memo to the board of directors, discuss the information found in each of the following financial statements, and describe how accounting information is used by managers for planning and control: balance sheet, income statement, statement of cash flows, statement of stockholders’ equity.

Paper For Above instruction

Introduction

Understanding the distinctions and intersections between financial and managerial accounting is crucial for effective financial management within an organization. Although both disciplines focus on financial information, their purposes, audiences, and types of reports differ significantly. This paper explores these similarities and differences, provides examples of managerial accounting reports used in business decision-making, and discusses how managers utilize financial statements for planning and control purposes.

Differences and Similarities Between Financial and Managerial Accounting

Financial accounting primarily concentrates on the preparation of historical financial statements—such as the income statement, balance sheet, statement of cash flows, and statement of owners’ equity—which are used externally by investors, creditors, regulators, and other stakeholders. Its core purpose is to provide a clear, accurate snapshot of the company’s financial position and performance over specific periods, ensuring compliance with generally accepted accounting principles (GAAP) (Weygandt, Kimmel, & Kieso, 2021).

Managerial accounting, in contrast, is more concerned with providing internal management with relevant, timely information to facilitate planning, controlling operations, and decision-making. Unlike financial accounting, managerial reports are often generated internally and do not need to adhere to GAAP. They include a broader variety of reports such as budgets, forecasts, variance analysis, contribution margin reports, and financial ratios (Drury, 2018).

The core similarity between these two fields is the reliance on financial data; managerial accounting often uses data derived from the financial statements. However, while financial accounting emphasizes accuracy and historical record-keeping, managerial accounting emphasizes relevance, timeliness, and future-oriented information to guide internal actions.

Examples of Managerial Accounting Reports in EEC

In the context of EEC, managerial accounting reports might include horizontal analysis, which compares financial data across different periods to identify trends; vertical analysis, which expresses financial statement line items as a percentage of a base figure (e.g., sales); and ratio analysis, which evaluates liquidity, profitability, and solvency (Garrison, Noreen, & Brewer, 2021).

These reports assist management in making decisions such as budgeting, cost control, pricing strategies, and capital investments. For instance, vertical analysis can reveal cost structure insights, while ratio analysis helps assess financial health and operational efficiency.

Use of Financial Statements for Planning and Control

The financial statements serve as foundational tools for managerial planning and control:

• Balance Sheet: Provides a snapshot of assets, liabilities, and equity at a specific point in time, enabling managers to evaluate the company’s financial position, liquidity, and capital structure (Weygandt et al., 2021). This information supports planning for asset allocation and debt management.
• Income Statement: Details revenues and expenses over a period, highlighting profitability and operational efficiency. Managers analyze this statement to identify profitable segments, control costs, and forecast future earnings (Garrison et al., 2021).
• Statement of Cash Flows: Illustrates cash inflows and outflows from operating, investing, and financing activities. It helps managers assess liquidity, manage working capital, and make strategic decisions regarding investments and financing (Weygandt et al., 2021).
• Statement of Stockholders’ Equity: Shows changes in equity account balances over time, including retained earnings and issuance or buyback of shares. This information guides decisions related to dividend policies and equity financing (Garrison et al., 2021).

In conclusion, the integration of financial data into managerial reports enables effective planning, performance evaluation, and decision-making. Managers need to interpret these financial statements meticulously to ensure organizational success, adapt strategies, and maintain competitive advantage.

References

• Drury, C. (2018). Management and Cost Accounting (10th ed.). Springer.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting (16th ed.). McGraw-Hill.
• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2021). Financial Accounting (11th ed.). Wiley.