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Ppt Managerial Accounting

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					                Accounting
• “Accounting is a system for keeping track of
  the financial status of an organization and
  the financial results of its activities” (Finkler
  2001, 4)
  – Managerial accounting generates information
    used to manage and improve performance:
    budgeting, cost analysis, asset allocation, etc.
  – Financial accounting “provides retrospective
    information,” which is “from time to time . . .
    summarized and reported to interested users,”
    including managers, vendors, creditors,
    regulators, legislators, citizens, et al.
Elements of an Accounting System
• Source Documents                                     Ledger:
                                                     Accumulates
                                                  transaction results
   – Purchase orders, invoices,                       by account
     receipts, time cards, etc.
• Journals
                                                       Journal:
   – Chronological records of                    Records transactions,
     transactions for each                           by accounts

     account and type of
     transaction
• Ledgers                         Purchase orders                        Invoices
   – Summarize totals and
     balances from journals
• Procedures and Controls
                                    Time cards                             Etc.
• People
 Financial Accounting / Reporting
• Government and nonprofit standards
  reflect their distinctive purposes
• GAAP: evolving consensus judgments,
  codified by standards-setting bodies
  – Transparency, relevance, accuracy, reliability,
    comparability, and meaningfulness
  – FASB: Business and nonprofit
  – GASB: State and local governments
  – FASAB: Federal government
                       MFBA
• Measurement Focus
  – Economic resources: all financial and capital
    resources, and changes in net assets
  – Current financial resources: likely to be consumed or
    converted to cash within a year (or other current
    period), excludes capital resources
• Basis of Accounting
  – Cash: record transactions when cash changes hands
  – Accrual: record revenues when reasonably certain to
    be collected, expenses when resources are used or
    consumed
  – Modified accrual: record inflows when measurable
    and available, expenditures when delivery of
    goods/services incurs obligation to pay
           Fund Accounting
• Used internally by nonprofits (FASB 117)
• Used internally and for external reporting
  by state and local governments
• For purposes of control / accountability
  – Ensures that resources are applied to their
    designated uses / purposes
  – Demonstrates compliance with legal and
    budgetary constraints on government
  – Segregates restricted, temporarily restricted,
    and unrestricted assets of nonprofits
    Fund Accounting: Government
• Governmental Funds (“expendable”): (1) general, (2)
  special revenue, (3) capital projects, (4) debt service,
  and (5) permanent (endowment-like)
   – Cover the basic services of government
   – Reported on a modified accrual basis, with a current financial
     resources measurement focus; also records encumbrances
• Proprietary Funds (“revolving”): (6) enterprise and (7)
  internal service funds (ISF)
   – Cover externally and internally charged-for goods and services
   – Reported on an accrual basis, with an economic resources
     measurement focus
• Fiduciary Funds (“revolving”): (8) public pension trust, (9)
  investment trust, (10) private-purpose trust, (11) agency
   – Account for assets held / managed on behalf of others, not
     available to the government for its own purposes
   – Reported on an accrual basis, with an economic resources
     measurement focus
        GASB 34 (issued 1999)
• “A virtual revolution in [government] financial
  reporting” (Holder 2004, 207):
• Government-wide statements presented on an
  accrual basis, economic resources focus
  – Statement of net assets, statement of activities
        – Governmental activities
        – Business-type activities
        – Component units
  – Infrastructure and other capital-asset reporting
        – Historical cost, net of depreciation ( = [purchase price – salvage
          value] ÷ useful life); or
        – “Modified approach” (annual maintenance costs)
• Required supplementary information (RSI)
  – Management discussion and analysis (MD&A)
  – Budgetary comparison: as adopted, amended, actual
    results
  – Long-term obligations and assets, financial risks
       Optional Format: The CAFR
• Introduction and letter of transmittal
• Financial section
   –   MD&A
   –   Basic financial statements and notes
   –   Other RSI
   –   Supplemental schedules
• Statistical section
   –   Revenues and expenditures
   –   Property tax information
   –   Debt and debt service information
   –   Demographic and economic information
   –   Operating information and other
                Nonprofit AFR
• External reporting distinguishes among
  – Unrestricted assets
  – Temporarily restricted assets
  – Permanently restricted assets
• “The primary purpose of fund accounting is to
  ensure that resources are used in accordance
  with their restrictions.” Types of funds:
  – Unrestricted / general / operating / current
  – Donor-restricted, either permanently or temporarily
    (e.g., building replacement, endowment, custodial)
  – Board-designated (treated as unrestricted for external
    reporting, since easier to change)
• IRS Form 990 an additional public report format
                       Auditing
• Financial
   – Confirm fair presentation of data, without material
     error or fraud, and legal compliance
   – Examine internal controls
• Single
   – For federal grantees receiving > $300K / year
   – Accuracy and GAAP compliance of BFS
   – Compliance with grant laws and regulations
• Performance
   – Economy, efficiency, program effectiveness
   – Current GASB-GFOA debate over SEA reporting
• Internal auditing often a useful function as well
 Some Elements of Managerial Accounting
• Cost finding / Cost accounting
  – Direct labor and materials, plus indirect costs (O/H)
     • Simple apportionment / allocation
     • ABC
  – Breakeven analysis
     • P · Q = FC + Q · VC
• Internal service funds / Responsibility centers
  – Routine generation of cost data
  – Better information on full costs of unit operations
  – Greater accountability of central service units, now
    that their services are no longer “free” to consumers
• Cost evaluation / Variance analysis
  – Spending: actual to budgeted spending variance
  – Usage: (dis)economies of scale (fixed, variable costs)
  – Efficiency: resource consumption per unit of output

				
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