Analyzing Financial Statements for Planning and Cost

750-1,000 words (not including title page and reference)

You have recently hired a new assistant, Susan Thompson, who previously worked in a financial accounting office preparing journal entries, which provide you with a recording of the day-to-day activities of the company and financial statements (income statement, statement of owners’ equity balance sheet, and cash flow statement). Although your new assistant has experience with and fully understands financial accounting, she has no experience with managerial accounting.

Part 1

In a memo to your new assistant, Susan Thompson, complete the following:

Explain to her the similarities and differences between financial and managerial accounting.
Provide examples of managerial accounting reports that she could expect to see within EEC, and explain how management might use the information to make decisions.
Keep in mind that although the income statement, the statement of owners’ equity balance sheet, and the cash flow statement are generated in financial accounting, they are used to develop all of your managerial accounting reports.
Examples of a few of those reports are the horizontal analyzes, vertical analyzes, and ratios.
Part 2

In a memo to the board of directors, discuss the information found in each of the following financial statements, and describe how accounting information is used by managers for planning and control:

Balance sheet
Income statement
Statement of cash flows
Statement of stockholders’ equity

Solution Preview

The differences

Both financial and managerial accounting is useful in providing financial information to users when it comes to making vital cooperate decisions. The primary purpose of financial accounting, as well as reporting, is to provide information to the already existing as well as potential lenders, investors, and creditors for them to make well-informed decisions concerning buying or lending as well as debt instruments and selling equity.

(1,039 words)