This course introduces you to cost and managerial accounting systems used in modern companies. Financial Accounting systems (FA) play a crucial role in the allocation and management of resources in human society.  FAs are often referred to as Scorekeeping devices that allow the organization to act relatively independently in day to day operations. It is the FA statements that provide the information needed to evaluate Management’s decisions compared to other companies. Or, simply, how well management has done its job? Consequently for managers how their actions will be reported by the FA is a crucial consideration.  Two types of accounting systems will be discussed in this class.

Cost accounting systems which follow GAAP rules to support calculation of Earnings (Net Income).

Managerial accounting is, on the other hand, not required by GAAP. Managerial accounting systems provide management information on how their decisions will impact FA earnings. This was really the start of the need for management accounting. Managers wanted to make decisions and plans that would result in higher Earnings.  They are optional and are only created by managers when the information provided from them will improve management’s decisions. A good analogy is to think about them like the statistics collected for baseball, football, or any other sport.  The statistic is only created if this information leads to better decisions about winning the game.
In practice, the primary users of FA information are creditors and owners who wish to compare the management of the company to other comparable companies. FA seeks comparability among business and thus common practices.  Management accounting is developed by managers for internal applications. This means a wide variety of techniques are applied in greater, or lesser, detail and variety as they uniquely interact with each company’s strategy to maintain and create value.