Financial Accounting Impact on Decision Makers

Question: Discuss about the Financial Accounting for Impact on Decision Makers. Answer: Introduction: Management and financial accounting are both significant tools for an organization, though they serve different purposes. An organization utilizes accounting in determining operational plans in future, reviewing their past performance as well as checking their current business roles (Kaplan Atkinson, 2015). Financial and management accounting have diverse audiences as potential investors are not engaged in the daily operations of the company but they are usually concerned on their investments while managers require information faster in making their business decisions (Horngren et al., 2012). To be more specific, financial accounting is utilized in presenting overall financial health of the firm to different external stockholders. It usually present particular period of time enabling the audience in reviewing how the firm has performed. Management accounting on the other hand is utilized in making decisions regarding the daily operations of an organization. This is not based on past performance, but it is based on future and current trends. With these considerations creating the two roles; that is management accountant and financial accountant would be crucial for the company. This is based on the fact that the two distinct roles would help in ensuring smooth and financial health organization. Management accountant role would be crucial to the firm since it assist in managing accounting of the finance in an organization. The individual assigned the management accountant role is very knowledgeable on all accounting rules in particular organization. His or her responsibility would entail computing to preparation of the financial statements in an organization which would be passed on to the top management of a particular firm (Horngren et al., 2005). With all the skills and expertise the management accountant possesses, s/he would be in a position to making some wise decision for an organization to prosper as well as gaining maximum income. In addition, the role of management accountant would be very important for the organization since would also entails risk management, strategic management as well as performance management; hence, facilitating smooth operation of the organization. Further, management accountant role would also be crucial for the firm since the person opera ting under this role would have combined knowledge and skills of a manager and accountant enabling them to account for every activity and cost being spent in the firm (Anthony, Welsch Reece, 1985). Management accountant would also be in a position to account for the money generated in an organization properly, while advancing an organization towards better production for the bigger income. Furthermore, management accountant would also provide advices to the managers on handling financial projects properly, predicting consequences of any operation as well as in financial decision-making by an organization, making reports on rivals financial moves and making internal audits. On the other hand, financial accountant role would also be very important in the organization since it would enhance proper financial management. In essence, financial accountant performs numerous functions than the management accountant (Burns Vaivio, 2001). S/he works directly for different organizations, performing internal financial related roles. Financial accountant also prepares internal financial statements, actively contributes to personnels operations, strategic and financial plans as well as in performing management duties. In most scenarios, financial accountant would help in reviewing financial transactions records for proper account posting and for accuracy (Albrecht, Stice Stice, 2010). The financial accountant also reviews all the records and books in ensuring that they are accurately recorded and that they accurately reflects operating outcomes of an entity. S/he would help in organizing the organizations records and books in preparations of the annual external aud iting of the firm. After review of the firms records and books, financial accountant is responsible for provision of advice and feedback to the senior management, especially relating to liability position, revenue issues, asset quality as well as cash flow sufficiency (Meigs, Lam Mallouk, 2002). The financial accountant is also responsible for offering advices on the use and status of an organization resource, results of the projections in an organization plan, updates on budgets and latest financial news which could impact on the companys operations. Further, financial accountant would be responsible in providing tax advices to the management including recommending action plans which reduces tax liability, non-taxable asset swaps, tax differed investments as well as cash flow planning in order to enable the firm remain liquid at the tax paying or filling duties (Burns Vaivio, 2001). The financial accountant would also help in preparation of all the tax reports and forms or in reviewing work of the o thers in ensuring that all taxes are filed correctly and on time. Therefore, the two distinct roles would be of great help to the firm in ensuring smooth operations. These roles would help in improving on how the company files its taxes as well as how it manages its finances. They would also assist the companys management in ensuring accurate records and books are maintained and ensuring that there is no incorrect use of the companys resources by its employees. Five Likely Questions That the HR Manager Will Ask After Presenting a Briefing on the Two Positions After presentation of the above roles to the HR managers, I anticipate the HR manager to ask the following questions; First, I anticipate the HR manager to ask me some of the advantages of creating the two roles to the company Secondly, I anticipate the HR manager to ask me some of the major disadvantages of management and financial accountant to the organizations. Thirdly, I anticipate the HR manager to ask me about some of the key skills and professionalism individuals applying for these roles should hold. Fourth, I anticipate the HR manager to ask me the additional costs creation of the two roles would have on the organization Finally, I anticipate the HR manager to ask me how the salary of the two roles would be catered for by the firm. Product cost classification Total prime cost is usually the total amount of costs incurred during production of a specific product. In essence, prime cost is usually the manufactured products costs used in producing a specific product. It is the measure of how much of the total production costs an organization should incur in producing a given product. It calculates the direct labor and raw materials but it fails to factor in the indirect manufacturing expenses like gas utilized in delivering the product or cost of logo. It is used in measuring total cost of production inputs required in creating a specific output. Generally, prime cost is usually the sum of the direct costs required in producing a product. This comprises of direct labor, direct material as well as other direct costs. It is usually equal to direct material costs plus wages plus direct labor costs plus fringe benefits. Therefore, in this case, total prime cost is calculated as follows; Manufacturing overhead costs comprises of organizations factory operations. It comprises of cost incurred in an organization except costs of the direct labor and direct materials. In essence, manufacturing overhead costs are the indirect factory-related costs incurred when a particular products is being manufactured. Alongside with costs like direct labor and direct material, manufacturing overhead costs should be assigned to every unit produced so as costs of goods sold and inventories are reported and valued in accordance with GAAP. To be more specific, manufacturing overhead costs comprises of things such as electricity utilized in operating factory equipment, cost for factory personnel, factory supplies as well as depreciation of factory equipment. With these considerations, total manufacturing overhead is calculated as follows; Conversion costs Conversion costs are those costs used in converting unfinished goods to finished goods. In essence, conversion costs comprise of all indirect and direct production costs that are incurred on activities which covert the raw materials or the unfinished products to finished goods. Therefore, conversion costs comprises of two components; that is, manufacturing overhead costs as well as the direct labor costs. It is calculated by adding manufacturing overhead costs to direct labor costs. With these considerations, total conversion cost in this case is calculated as follows; Product cost is the cost utilized in creating a product. This includes direct material costs, direct labor costs as well as factory overheads. It can also be considered as the cost of labor needed in delivering services to the clients (Kimmel, Weygandt Kieso, 2010). In essence, product costs for the external reporting comprises of portion of an organization costs which do not differ with units produced. Such costs include labor costs, overhead costs as well as material costs. With these considerations, product costs in this case will be calculated as follows; ventory, expenses or the fixed assets (Porter Norton, 2012). It is more closely linked with passage of time as compared to transactional event. In essence, period costs are those cost which are not included in product costs and they are not part and parcel of the manufacturing process and thus are treated as expenses for period in which they are incurred. With these considerations, total period cost in this case is calculated as follows; Cost behavior Engineered variable costs are those costs that are directly linked with sales or production level in an organization (Libby, Libby Short, 2001). Further, discretionary fixed costs are those costs or expenditures for a fixed asset, which could be reduced or eliminated without having immediate effects on reported profitability of an organization (Horngren et al., 2002). On the other hand, committed fixed cost is usually an investment which an organization has already made and could not recover at all or obligations already made which an organization could not get out from such obligation. Costs Classification Of The Costs Reason For Specific Classification a. Cost of daily radio advertising on the local community radio station. discretionary fixed costs This is based on the fact that this cost could be reduced or eliminated without any immediate effects on organizations profitability. b. costs of the fabric used to make the T-shirts engineered variable costs This is because the cost differs or varies based on the output level. c. cost of the ink used in the designs engineered variable costs The reason behind this classification is that the cost differs or varies based on the output level. d. Salary of the managing director committed fixed costs The reason behind this classification is because the cost cannot be reduced or eliminated since it would impair operation of the organization. e. Wages of the production employees who sew and print the T-shirts Engineered variable costs This is based on the fact that the cost is directly linked with the number of T-shirts sewed and printed. f. Costs of movie tickets provided for the Employees of the month award each month Discretionary fixed costs This is based on the fact that this cost could be reduced or eliminated without any immediate effects on organizations profitability. g. Depreciation of the sewing machines, calculated on a units of production basis committed fixed costs This is based on the notion that depreciation is a cost that arises once the company starts its operations and therefore nothing much could be done in reducing such cost. h. Cost of electricity used in the factory building committed fixed costs This is committed fixed cost since the company cannot forego this costs no matter what without impairing its competence in meeting long-run objectives i. Rent of the building committed fixed costs This is because rent is a cost that must be paid by an organization to continue its operations in the building j. Wages of the staff who package the T-shirts. Engineered variable costs This is based on the fact that this cost is directly dependent on the number of T-shirts being packaged. k. Cost of sewing machine maintenance Committed fixed costs This is based on the fact that this cost could not be reduced or eliminated since it have to be there for normal operations of the company to be continue smoothly. l. Cost of the new advertising sign at the front of the factory. Discretionary fixed costs The reason behind this classification is that such a cost could be eliminated without causing any negative effect on the organizations profitability m. Cost of the company car used by the managing director Discretionary fixed costs The notion behind this is that this cost is set for a specific period by management during budgeting but can be eliminated completely without any affecting the companys operations. References Albrecht, W., Stice, E., Stice, J. (2010).Financial accounting. Cengage Learning. Anthony, R. N., Welsch, G. A., Reece, J. S. (1985).Fundamentals of management accounting. McGraw-Hill/Irwin. Burns, J., Vaivio, J. (2001). Management accounting change.Management accounting research,12(4), 389-402. Horngren, C. T., Bhimani, A., Srikant M.. Datar, Foster, G., Horngren, C. T. (2002).Management and cost accounting. Harlow: Financial Times/Prentice Hall. Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., Schatzberg, J. 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