Respond to 2 Colleagues 1 paragraph each Discussion-Accounting

Recall the Week 1 Discussion, “Shared Practice: Financial vs. Managerial Accounting,” where you and your colleagues described the types of decisions that could be made using financial and managerial accounting. Read through your colleagues’ posts and respond to two or more of your colleagues in one of the following ways:

Post the following:

· Provide insights or contrasting observations regarding financial and managerial accounting that you gained from reading their posts.

· Offer other examples, based on your experience or research, of when such accounting data was effectively used or when decisions were made without it and explain the results.

· Describe trends you observe from the posts of your colleagues and why those are important.

1st Colleague to Respond to:

One example of a financial accounting decision that I have experienced was when I worked for a non-profit organization that serviced battered women and children. We provided safe shelter, daycare services, job readiness classes, and therapy for both mother and child. We operated solely on donations, federal funds, and more than the others, the Victims of Crimes grant. In order to keep receiving the grant funds, we had to provide financial accounting reports. These reports included the material and items we bought with the funds and how they helped the population these monies were allotted for. While preparing my report quarterly, I accounted for everything we provided the survivors (as we called them) with from toiletries to blankets and sheets, to coats and other season-specific items.  My report also had to include how these items bought helped to improve the survivors' life and situation.  A very detailed itemized report helped us show if and why we needed more funds and where the monies were being spent. 

Our program benefits from decisions, based on how much grant money our program can be allotted when the information we submit is accurate. We have been able to successfully help over 75 women and their children escape domestic situations and after a minimum of 5 months in our program, these women were successfully relocated to their own homes and or apartments. In our programs, we taught budgeting, driving if needed, cooking, and several other life skills that these families may need to be successful independent from our program and their perpetrators. By accurately reporting how these programs have helped our members, we are able to show the grantors that our program is needed and therefore, so is their funding.  On the contrary, If we inaccurately report numbers or the needs of our members, we lose funding. We learned the hard way by including our donations in the count for what we had and ended up losing a small percentage of the grant funding. With that three or five percent we lost, it impacted us more than we accounted for. When our members are able to move we furnish the apartments with the necessities. The year we lost that small percentage, we were not able to buy new furniture for 3 of our women who completed our program. That resulted in us taking out of our shelter. This decreased the number of people we could serve in our shelter because there were fewer beds. 

In managerial accounting which “provides information for planning decisions and control, it is useful for assigning decision-making authority, measuring performance, and determining rewards for individuals within the organization” (Zimmerman, 2017). In the same experience example as above, the managerial accounting report that I will talk about is inventory. A few decisions that could be made using the information provided by this managerial accounting include what to buy and how to spend allocated funds.  Inventory in our programs determines how often we buy towels and or mattresses and what we need to buy organization-wide.  The accurate reporting would help to make decisions on when to buy certain things and how many of those said things to buy. I worked for this organization in St. Louis and one winter we had a bad ice storm. Items that we did not account for in our budget and inventory were shovels and salt melt. Stores all throughout our area were out, and we ended up sending a company to service our member's homes, which ultimately cost more from the budget that we did not account for.  After that winter, we kept those things along with extra winter necessities like coats, gloves, and scarves in regular inventory counts and ordering lists. Inaccurate information can hurt us just like it did, not having things when we needed it.  Same for mattresses and comforter sets running low when we have families moving into their own place. 

References:

Zimmerman, J. L. (2017). Accounting for decision making and control (9th ed.). New York, NY: McGraw-Hill. 

2nd Colleague to respond to:

Financial Accounting Vs. Managerial Accounting :

Financial accounting information helps in making various decisions by the different stakeholders of the financial information. Investing decisions and lending decisions are examples of the decisions that the financial information provided by the company will help. The investors will be in a position to evaluate the performance of a company stock (Horngren, Datar, & Rajan, 2012). The financial statements like the income statement, statement of the financial position, and the statement of cash flows will enable the creditors in determining the creditworthiness of the company.

Investing decisions

The financial statements of any publicly-traded company are always prepared and reported according to the financial accounting standards prescribed Financial Accounting Standards Board (Horngren, Datar, & Rajan, 2012). This information presented on the balance sheet, income statement, and the statement of cash flows allows the investors to understand the history and current financial health of the company’s stock and bonds issued. The standards that are set forth by the FASB protects the investors from using doctored information. Investors for example are interested in the information about the Earnings Per Share (Kimmel, Weygandt, & Kieso, 2011). This will help them to understand the growth of the stock prices. The investors will not invest in good investments if they will be supplied with inaccurate information.

Lending decisions

Debt to equity ratio, current ratio, quick ratio, and times interest earned ratio is the accounting ratios that the creditors of a company do rely on when assessing the company’s creditworthiness. These ratios are derived from the financial statements like the income statements and balance sheet (Kimmel, Weygandt, & Kieso, 2011). This information is needed by the lending institutions when they want to advance credit to the company. Providing inaccurate information in the financial statements will mislead the lenders in making their lending decisions. The lending institution will not establish the amount of credit that the company should be awarded. The lending institution will be faced with credit risk as the company may be a credit defaulter.

Managerial accounting

Examples of the decisions that managerial accounting information helps are relevant cost analysis decisions and make-buy decisions.

Relevant cost analysis decisions

Managerial accounting information is very useful for the company as it is used in determining what the company should sell and the way they should be sold. For instance, a decision that should be made by the company is about where the company should focus its marketing activities (Kimmel, Weygandt, & Kieso, 2011). The management accountant should examine the costs of the various available advertisement alternatives for each of the products of the organization. The resultant information will be used by the management to arrive at the correct decisions. There is a risk of incurring huge costs if the company will not use accurate information.

Make or Buy decisions

Another primary and basic use the managerial accounting information to a company is to supply information that will be used in the manufacturing of the company’s products. A make or buy decision is important for a company that manufactures products that need components (Warren, Reeve, & Fess, 2005). A company for instance may be considering the possibility of making a component or buying the same component. The management accountant will perform a make or buy decision to determine whether the component should be outsourced or manufactured. The information supplied will definitely help in making such decisions. There is a risk of manufacturing products at a high cost which will result in making losses.

References:

Horngren, C. T., Datar, S. M., & Rajan, M. V. (2012). Cost accounting: A managerial emphasis. Upper Saddle River, NJ: Pearson/Prentice Hall.

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting: Tools for business decision making. Hoboken, NJ: Wiley.

Warren, C. S., Reeve, J. M., & Fess, P. E. (2005). Financial & managerial accounting. Mason, OH: Thomson/South-Western.