Acct2220 Exam 1 Study Guide
Chapter 1 - Managerial vs. Financial Accounting:
-What are the differences between Financial (Acct 2210 or equivalent) and Managerial accounting? Which discipline seems to be more structured and places more emphasis on precision? Which focuses more on future planning and information relevance? Why?
Financial accounting – provides information used primarily by investors, creditors, and others OUTSIDE a business.
--External users (investors and creditors) have greater needs for general economic information than do internal users.
Managerial accounting focuses on information used by executives, managers, and employees who with INSIDE a business.
--Internal users need information to plan, direct, and control business operations.
FEATURES | MANAGERIAL | FINANCIAL | USERS | Insiders including executives, managers, and operators | Outsiders including investors, creditors, gov. agencies, analysts, and reporters | INFO TYPE | Economic and physical data as well as financial data | Financial data | LEVEL OF AGGREGATION | Local info on subunits of the organization | Global info on company as a whole | REGULATION | No regulation, limited only by the value-added principle | Regulation by SEC,FASB, and other determiners of GAAP | TIME HORIZON/INFORMATION CHARACTERISTICS | Past, present, future / estimates that promote relevance and enable timeliness | Past only, historically based / Factual info that is characterized by objectivity, reliability, consistency, and accuracy | REPORTING FREQUENCY | Continuous reporting | Delayed with emphasis on annual reports |
-What is the difference between "accrual-basis net income" and "cash flow"? How can this difference be so substantial? Yes, to both questions, but how are these scenarios possible?
Accrual basis net income- the accrual accounting model measures an entity's accomplishments and resource sacrifices during the period, regardless of when cash is received or paid.
Cash flow- Cash basis
-What are the differences between Financial (Acct 2210 or equivalent) and Managerial accounting? Which discipline seems to be more structured and places more emphasis on precision? Which focuses more on future planning and information relevance? Why?
Financial accounting – provides information used primarily by investors, creditors, and others OUTSIDE a business.
--External users (investors and creditors) have greater needs for general economic information than do internal users.
Managerial accounting focuses on information used by executives, managers, and employees who with INSIDE a business.
--Internal users need information to plan, direct, and control business operations.
FEATURES | MANAGERIAL | FINANCIAL | USERS | Insiders including executives, managers, and operators | Outsiders including investors, creditors, gov. agencies, analysts, and reporters | INFO TYPE | Economic and physical data as well as financial data | Financial data | LEVEL OF AGGREGATION | Local info on subunits of the organization | Global info on company as a whole | REGULATION | No regulation, limited only by the value-added principle | Regulation by SEC,FASB, and other determiners of GAAP | TIME HORIZON/INFORMATION CHARACTERISTICS | Past, present, future / estimates that promote relevance and enable timeliness | Past only, historically based / Factual info that is characterized by objectivity, reliability, consistency, and accuracy | REPORTING FREQUENCY | Continuous reporting | Delayed with emphasis on annual reports |
-What is the difference between "accrual-basis net income" and "cash flow"? How can this difference be so substantial? Yes, to both questions, but how are these scenarios possible?
Accrual basis net income- the accrual accounting model measures an entity's accomplishments and resource sacrifices during the period, regardless of when cash is received or paid.
Cash flow- Cash basis