Objectives (Week 1)
* Explain the role of budgets and performance reports in the management decision-making process.
* Evaluate the role of ethics in accounting decision making.
* Evaluate relevant accounting information for business decision making.
Highlights to Remember (Ch 1)
1 Describe the major users and uses of accounting information. Internal managers use accounting
information for making short-term planning and control decisions, for making non-routine decisions,
and for formulating overall policies and long-range plans. External users, such as investors and regulators,
use published financial statements to make investment decisions, regulatory rulings, and many
other decisions. Managers use accounting information to answer scorekeeping, attention-directing, and
problem-solving questions.
2 Explain why ethics is important to management accountants. Integrity is essential to accountants
because they provide information that users must trust to be right. Users of accounting information
cannot directly assess the quality of that information, and if they cannot rely on accountants to produce
unbiased information, the information will have little value to the users.
3 Describe the cost-benefit and behavioral issues involved in designing an accounting system.
Companies design management accounting information systems for the benefit of managers. These
systems should be judged by a cost-benefit criterion—the benefits of better decisions should exceed the
cost of the system. Behavioral factors—how the system affects managers and their decisions—greatly
affect the benefit of a system.
4 Explain the role of budgets and performance reports in planning and control. Budgets and performance
reports are essential tools for planning and control. Budgets result from the planning process.
Managers use them to translate the organization’s goals into action. A performance report compares actual
results to the budget. Managers use these...