ACC 205 Principles of Accounting I
Prof. Jenny Davis
April 2, 2012
Modern Accounting Enables Greater Management Tools
Modern accounting systems have made many differences in modern organizations. These differences have made it easier for owners and managers to make the right financial decisions at critical times. Modern accounting techniques and modern accounting software make it possible for corporate decision makers to look upon real-time financial information in order to decide the company’s future. These modern procedures enable managers to determine requirements based on information that is not contained specifically in the financial statements. Modern and managerial accounting has proven to enhance a manager’s toolbox when important decisions for the company have to be made. Horngren, Harrison & Oliver (2012) point out the differences between financial and managerial accounting as, “Financial accounting focuses on preparing financial statements. Managerial (or management) accounting focuses on the accounting tools managers use to run a business” (pg. 773). It is important to note that even though the basic financial accounting model is relevant, there is a difference as to how you apply this as a managerial tool. In order to distinguish managerial accounting from financial accounting, you need to know that managers are held accountable to corporate interests or stakeholders. The manager’s use financial accounting for external purposes, financial statements, and managerial accounting is used for internal purposes, planning and decisions. Financial accounting is used to report, through financial statements, the organizations financial status, cash flow, and profitability to all external stakeholders: investors, financial institutions, and partners. According to Horngren et al. (2012), the financial statements “satisfies management's accountability (responsibility) to:...