Chapter 1

1. Chapter 1 Accounting Information and Managerial Decisions

2. Introduction DATA- Financial Statements, customer lists, inventory records, number and type of products or services sold. INFORMATION - Data that have been organized, processed, and summarized. KNOWLEDGE – Information that is shared and exploited so that it adds value to an organization.

3. Introduction DATA become INFORMATION when organized, processed, and summarized, and information becomes KNOWLEDGE when it is shared and exploited to add value to an organization.

4. Accounting Information Accounting information includes both financial and nonfinancial information used by decision makers.

5. External Stockholders Potential Investors Creditors Government Agencies Suppliers Customers Internal Employees Employee Teams Departments Regions Top Management Users of Accounting Information Financial Accounting Managerial Accounting

6. Users of Accounting Information The three primary activities of managers are planning, operating and controlling

7. The Role of the Managerial Accountant Managerial accountants facilitate management decision making.

8. The Information Needs of Internal and External Users • External Users • Less flexible • Geared toward reports on company as a whole • Must meet requirements of SEC, GAAP, IRS • Internal Users • More flexible • May be geared toward specific segments of a company • May be customized, less precise, and uses estimates frequently

9. A Decision-Making Model Never make decisions with just the numbers! Always consider nonnumerical (qualitative) information.

10. Enterprise Risk Management • Every business faces risk and uncertainty • Risk is often thought of in negative terms, but risk can provide opportunities • Businesses must identify and effectively manage risks