FINANCIAL AND MANAGEMENT ACCOUNTING

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 the 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 the horizontal analyzes, vertical analyzes, 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