Accounting for Managers: Interpreting Accounting Information for Decision-Making, Canadian Edition

PART II

Using Accounting Information for Decision Making, Planning, and Control

Part I was concerned with the rules of financial reporting and interpreting financial reports. Financial reporting tends to have an external focus, such as providing scorekeeping or attention-directing information to stakeholders. Part II shows the reader how accounting information is used by managers within a company. While an analysis of financial reports is useful, particularly for external interested parties (shareholders, bankers, and the government), the information is of limited use to the internal management of the business for the following reasons:

It is aggregated to the corporate level, whereas managers require information at the business-unit level.

It is aggregated to annual figures, whereas managers require timely information, usually at not less than monthly intervals.

It is aggregated to headline figures, whereas managers require information in much greater detail.

It does not provide a comparison of plan to actual figures to provide a gauge on progress towards achieving business goals. ...