The opening paragraph of an accounting textbook says, “Managers need accounting information and need to know how to use it.”10 Critically evaluate this statement.
Using Accounting for Planning
The owner of a small software company felt his accounting system was useless. He stated, “Account- ing systems only generate historical costs. Historical costs are useless in my business because every- thing changes so rapidly.”
a. Are historical costs useless in rapidly changing environments?
b. Should accounting systems be limited to historical costs?
Goals of a Corporation
A finance professor and a marketing professor were recently comparing notes on their perceptions of corporations. The …show more content…
How are future revenues and costs of proposed car models estimated? Similarly, in de- ciding which investment projects to accept, capital budgeting analysts require data on fu- ture cash flows. How are these numbers derived? How does one coordinate the activities of hundreds or thousands of employees in the firm so that these employees accept senior man- agement’s leadership? At BMW and organizations small and large, managers must have good information to make all these decisions and the leadership abilities to get others to implement the decisions.
Information about firms’ future costs and revenues is not readily available but must be estimated by managers. Organizations must obtain and disseminate the knowledge to make these decisions. Decision making is much easier with the requisite knowledge.
Organizations’ internal information systems provide some of the knowledge for these pricing, production, capital budgeting, and marketing decisions. These systems range from the informal and the rudimentary to very sophisticated, computerized management infor- mation systems. The term information system should not be interpreted to mean a single, integrated system. Most information systems consist not only of formal,
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