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Foundations in Accounting II

This course focuses on the use of accounting information in efficiently operating an organization. The concepts are sufficiently general to be applicable in both “profit” and “not-for-profit” organizations. Management accounting has two major roles:

Decision-Facilitating Role: Managers have the responsibility and authority for making decisions with respect to the acquisition and use of an organization’s resources. To do this effectively they must identify the actions (or strategies) available to them, predict the relevant consequences of those actions, and then choose the action that has the most preferred predicted outcome. Management accounting systems can be effective tools in providing information that is useful in predicting the possible consequences of alternative actions and in presenting a description of those consequences. Furthermore, management accounting systems can help identify situations in which “corrective” action is required.

Decision-Influencing Role: Managers are often employees, rather than owners, of an organization. Their action choices are affected by their personal preferences with respect to the consequences of those actions. Management accounting systems can be effective tools in providing measures of management performance which, when combined with appropriate incentives, will induce management to select the actions preferred by the owners or directors of the organization. In so doing, the system is fulfilling its decision-influencing role.

An organization’s accounting records must provide the information necessary to prepare the financial statements reported to investors, bankers, unions and others who are not part of the firm’s management. These statements must be prepared in accordance with generally accepted accounting principles (GAAP), particularly if the statements are audited. However, the information reported to management need not be prepared in accordance with GAAP. Management wants the information that is most useful in operating their organization, and that often differs from the information used to satisfy GAAP. We will discuss how management accounting is influenced by GAAP, but our primary focus is on understanding how to develop the information that will be most useful to management, and how to make effective use of that information.

Instructor Biography - Rob Jackes

Course Outline - Class of 2018 (updated October 20, 2017)

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