261. Financial accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators. Managerial accounting is concerned with providing information to managers for use within the organization.262. Finally, financial accounting is mandatory for external reports and it needs to comply with rules, such as generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), whereas managerial accounting is not mandatory and it does not need to comply with externally imposed rules.263. As mentioned in Exhibit P1, managerial accounting helps managers perform three vital activities—planning, controlling, and decision making.264. Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.265. A budget is a detailed plan for the future that is usually expressed in formal quantitative terms.266. This process would involve gathering, evaluating, and responding to feedback to ensure that this year’s recruiting process meets expectations.267. When answering these questions your goal would be to go beyond simple yes or no answers in search of the underlying reasons why performance exceeded or failed to meet expectations.268. A performance report compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identify and eliminate sources of unsatisfactory performance.269. Perhaps the most basic managerial skill is the ability to make intelligent, data-driven decisions.270. AAA must decide how to allocate its marketing budget between products that tend to appeal to male versus female customers.271. This book helps prepare you to become an effective manager by explaining how to make intelligent data-driven decisions, how to create financial plans for the future, and how to continually make progress toward achieving goals by obtaining, evaluating, and responding to feedback.272. To reduce these anxieties, we recommend deemphasizing what you cannot control about the future; instead focusing on what you can control right now.273. Next, we will elaborate on this point by explaining how managerial accounting relates to the future careers of business majors and accounting majors.274. They may also decide whether to sell products directly to the customer or to sell to a distributor, who then sells to the end consumer.275. The right-hand column of Exhibit P3 explains how human resource managers make a variety of planning decisions, such as budgeting how much to spend on occupational safety training and employee recruitment advertising.276. However, the primary role of managerial accountants is to partner with their co-workers within the organization to improve performance.277. Your employer will expect you to have strong financial accounting skills, but more importantly, it will expect you to help improve organizational performance by applying the planning, controlling, and decision-making skills that are the foundation of managerial accounting.278. Ethical behavior is the lubricant that keeps the economy running. Without that lubricant, the economy would operate much less efficiently—less would be available to consumers, quality would be lower, and prices would be higher.279. Thus, for the good of everyone—including profit-making companies—it is vitally important that business be conducted within an ethical framework that builds and sustains trust.280. The numbers that managers rely on for planning, controlling, and decision making are meaningless unless they have been competently, objectively, and honestly gathered, analyzed, and reported.
