Question

Describe a specific managerial accounting report that provided (or provides) special-purpose information for you as an employee to help you make a decision. Identify any improvements that can be made to this report or identify another “special-purpose” accounting report not presently available to you that would help you in making a different decision.

Answer 1

Managerial Accounting Report

Financial Reports

Although financial reports are sometimes considered to be a different animal from managerial accounting, traditional financial reports also provide useful information to help you to understand company operations. Your profit and loss statement shows how much your company has spent and earned overall, breaking these numbers into categories and summarizing how much profit you've earned. Your balance sheet summarizes how much your company earns and how much it owes. This information is useful for managerial accounting because it shows how your profits and losses have fluctuated over time, and how much of your company's net worth takes the form of liquid cash that's available for operations.

Pro Forma Cash Flow

Your pro forma cash flow shows how much money you expect to come in during short-and-medium-term accounting periods, and how much you anticipate spending. This managerial accounting report gives a month-by-month summary of incoming and outgoing cash, showing when to anticipate shortfalls and surpluses. A short-term pro forma cash flow report is more useful than a longer-term version because, the farther out the predictions, the less accurate they are. Unforeseen circumstances such as obstacles and opportunities arise, and situations play out in ways you can't possibly foresee

Item Cost Reports

Your overall sales in each category only tell half the story: to truly understand where your business is most profitable, you must also have managerial accounting reports that show how much you've spent in each category. Item cost reports break down labor, materials and other expenses such as fees and licenses based on how these expenditures contribute to different types of earnings. By subtracting the expenses per category from the sales per category

Characteristics of Managerial Accounting Reports

Many of you will work in manufacturing companies or provide services for them. Others will work in retail or service organizations that do business with manufacturers. This section will help you understand how manufacturing companies work and how to read both their internal and external financial statements.

Assume you own a bicycle store and purchase bicycles and accessories to sell to customers. To determine your profitability, you would subtract the cost of bicycles and accessories from your gross sales as cost of goods sold. However, if you owned the manufacturing company that made the bicycles, you would base your cost of goods sold on the cost of manufacturing those bicycles. Accounting for manufacturing costs is more complex than accounting for costs of merchandise purchased that is ready for sale.

Perhaps the most important accounting difference between merchandisers and manufacturers relates to the differences in the nature of their activities. A merchandiser purchases finished goods ready to be sold. On the other hand, a manufacturer must purchase raw materials and use production equipment and employee labor to transform the raw materials into finished products.

NEW ROLES

Significant advances in automating routine transaction-related accounting tasks, combined with a strong corporate emphasis on value creation, have signaled new directions for managerial accounting. This trend had been building since the 1980s and accelerated in the mid-1990s. The thrust of the changes have been to make management accountants strategic partners and analysts in management decision making, rather than simply suppliers of data.

Special-purpose financial statement

A special-purpose financial statement is a financial report that is intended for presentation to a limited group of users. A special-purpose statement may accompany a complete set of financial statements that is intended for general use, or it may be presented separately. This type of statement is usually required by a government entity, and is intended to present a specific set of information in a predetermined format. The information required and the reporting format used is laid out in a reporting framework. For example, reporting frameworks may be applied to the generation of special-purpose financial statements for tax reporting, bank reporting, and industry-specific reporting. The specialized reporting frameworks on which special-purpose financial statements are based are typically promulgated by the entities that plan to use the resulting financial statements.