Financial accounting documents and managerial accounting documents

[eden hazard]

Hello everyone,

I am a beginner in accounting and I have come to one, a bit confusing part.I have an annual report in 10k form, which I have to go through and then answer few questions regarding it.

The confusing question I face is whether this 10k form annual report is a document of financial or managerial accounting ?

I have tried to solve this by analyzing the five aspects (purpose of report, primary users, content, verification, etc.) and my opinion was so divided.

I would appreciate someone's assistance on this.

 

[Counterofbeans]

Financial and it isn't even close.

I live 10Ks. You have any questions, let me know.

 

[eden hazard]

Hi Counterofbeans,

thanks for your response.

The main source of my confusion was that the course I am doing is called 'Managerial accounting' (this is a silly reason for suspecting that the report is managerial doc, I know).

In giving a constructive answer, would it be okay to say that this report is financial because:

-it is released for public (so primary users are external users)
-it is periodically made (annually, while managerial reports are made whenever needed)
-has a general purpose (not a specific purpose, as it would in managerial)
-focused on organization as a whole (in managerial it would be on specific dept's ?)
-verified by Touche & Deloitte LLP (managerial doc's never need to be verified at all)

... ?


In addition to this, are all 10k's basically considered as financial accounting documents ?



Thanks a lot.

 

[Counterofbeans]

No to most above. Step back and ask yourself what financial accounting is vs.managerial accounting. I'm guessing you just started, for the teacher is probably trying to show you the difference...

The primary reason it's financial is because your disclosing financial information to 3rd parties, primarily investors. No reasonable officer would ever run their business with the information provided by a 10k.

Far more often than not, you run your business with managerial accounting reports, which are generally internal only.

Almost by definition, a 10K is a financial document

 

[eden hazard]

But aren't the aspects I mentioned the main ones on which we can differentiate financial accounting and managerial accounting reports ? What would be wrong with those ?

Especially with the first one, since you said that the primary reason that this is financial is because financial info is disclosed to 3rd parties, primarily investors.The first thing I enlisted there is that the report is released for external users.

 

[Counterofbeans]

But that isn't what makes a 10k a financial document or not, which is what I'm focused on. You can walk down to your corner bank with non public financials/10k and its still a financial document.

Or are you now asking what the difference is between those two?

Attributes of financial documents vs.managerial documents?

 

[eden hazard]

Oh we got a little misunderstanding here.Regarding those aspects, I was talking about financial documents generally, not 10k specifically.10k was a separate subject here.

May I ask you few more ?

1) If I got gross margin percentages for three years, and if the percentage kept increasing (from 31.4 % in 2012 to 34.3 % in 2014), that means it is favorable ? Or there is something else I should consider in here to determine whether it is favorable or not ?

2) Can there be a situation where cost of goods manufactured is equal to cost of goods sold and how ?

 

[Counterofbeans]

1) If I got gross margin percentages for three years, and if the percentage kept increasing (from 31.4 % in 2012 to 34.3 % in 2014), that means it is favorable ? Or there is something else I should consider in here to determine whether it is favorable or not ?

It means they are kicking ass...

Yes, you could call it favorable.

But I'd also want to look at total sales as well. While I would love the consistent increase in GM%, I might otherwise be disappointed if sales significantly decreased

2) Can there be a situation where cost of goods manufactured is equal to cost of goods sold and how ?

I suppose, but it would likely be by coincidence.

To answer "how" is very tricky, as you haven't told me what cost flow assumptions the company is using. Specific identification would likely be fairly easy to do that, dollar-value LIFO, umm, not so much...

 

[eden hazard]

It means they are kicking ass...

Yes, you could call it favorable.

But I'd also want to look at total sales as well. While I would love the consistent increase in GM%, I might otherwise be disappointed if sales significantly decreased

Here is their entire income statement, have a look.

http:

//i.imgur.com/aH9kfVr.png

(just pair up the two above, I cannot post links until I reach 10 posts )