Managerial and Financial Accounting
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Managerial accounting is the general information used by the persons within the organization. Reports for managerial accounting can be posted any time, daily, weekly or even monthly. Financial accounting is for those people, who are outside the organization. For them the reports can be created within a specified period of time.
They are mainly used for the persons who may have the desire of investing in the company. Managerial accounting is very secretive, because it is about financial reports that are confidential to the organization and are only used by the top management. One ofthe differences between managerial and financial accounting techniques isthat financial accounting covers the whole of the organization, while managerial accounting covers certain parts of the organization. Financial accounting is duly required by the law because it is very important in statutory accounts, while managerial accounting is not that important. Managerial accounting also provides information to the persons within the organization, while financial accounting meets the requirement needed by the outsiders such as the stakeholders.
The important use of financial reports is evaluating and monitoring the personnel and giving the reports to the interested persons. This helps reduce the principal personnel problem through maximum supervision that is exhibited by the financial accounting reports. This will have a very positive impact on the organization leading to excellent performances and growth of the organization (Reeve, 2011).It will correct the mistake that was brought about by the lack of credibility by the organization management. The transparency that will prevail will lead to motivation of the organization stakeholders and that will help in the company’s expansion.
This repot will give clear evidence about the organization proceedings and operations that are very important for the outside supporters of the company leading to clear understanding of their investments. The financial reports give the financial status of the organization and also provide closer assessment of organizational assets leading to proper maintenance of the assets. They also give better facilitation of the organization cash leading to higher standards of management of the company cash flow rates (Reeve, 2011). These reports are very important because they give the general public the access to the financial issues involving the organization leading to creation of confidence by the stakeholders to the organization management. They are essential in giving the requisite information about the organization management.
This is the information that the managers require to make decisions about the organization so as to strengthen their managerial functions in the organization. It is very confidential information that is to be used by managers only so as to perform their duties in a better way (Warren, 2010). Managerial reports help managers lay plans for the organization and improve in the decision making process of the managers in the future plans of the organization. Managerial accounting helps in strategic management. Strategic management involves the strategic plans that are very important in an organization (Warren, 2010). This will partner with management accountants in giving more elaborate plans that will defend the rights of the organization. They will also give better results in management leading to improved performances that will give the organization a good push forward leading to achievement of the organizational goals. This is a report that leads the organization to acquiring the qualities of good management such as enhanced management skills and discipline among the organizational workers that helps the organization to prosper and overcome the competitive marketworld.
Managerial accounting is also featured in the risk management that is prevalent in the line of business (Davis, 2008). This will help the organization push through the competitive business field that is really an issue in many business fields, which has led to collapse of someorganizations whose management has been an issue. The managerial accounting changes with the business environment prevalent with the organization.CMA is a more learned personnel on matters of management in risk control, financial control and management skills.CMA accountants are learned more than those certified public accountants. Hence, one has to choose which persons to employ depending on the type of job. If the job requires attention, a CMA accountant is more suitable.
Contribution and Absorption
Income statements that are prepared through absorption and the variable have a distinct difference in the net operating digits. This gives the importance of preparing another income statement so as to produce the adjustable results.These will be prepared on the variable costing and on the absorption costing. The difference is brought about by the lack of differences by the absorption costing between variable and fixed costs due to lack of well composed cost volume profit analysis(Davis, 2008). This will give companies the reason to compute two income statements so as to encounter this problem of lack of consistence by use of other formulas. Thebreak even point is where no profit or loss is made, but the expenses are equal to the revenue.
Total contribution = Total fixed costs
Unit contribution * Number of units = Total Fixed Costs
Number of Units = Total fixed costs / Unit contribution
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Break even = fixed cost/ c/p where c/p is unit contribution margin over price
Fixed costs / price – variable costs
$60,000 / $2.00 - $0.80 = 50,000 units
This mathematics is usually common in every sector so as to validate the buying and selling price of an item so as to cover for the item in order to earn profit. This gives the correct position of the item to identify whether it has gone under loss or profit.
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