Question

exercise 14-1 (algo) managerial vs. financial accounting lo c1
indicate whether each decision is most likely to be made using managerial accounting information or financial accounting information.

business decision	primary information source
2. determine whether to lend to a company
3. prepare gaap - based financial statements for creditors

| 4. estimate profits from a new service opportunity | managerial
financial |

5. evaluate a purchasing department’s performance
6. estimate product cost for a new line of shoes
7. measure profitability of an individual store
8. determine location and size for a new plant

Explanation:

To solve this, we analyze each decision based on the purpose of managerial (internal, for planning/control) vs. financial (external, for reporting) accounting:

1. Prepare manufacturing budgets for the next year

Managerial accounting is used for internal planning (budgets).
Source: Managerial

2. Determine whether to lend to a company

Lenders use financial accounting (external reports) to assess risk.
Source: Financial

3. Prepare GAAP - based financial statements for creditors

Financial accounting follows GAAP for external stakeholders (creditors).
Source: Financial

4. Estimate profits from a new service opportunity

Internal planning (estimating profits for new opportunities) uses managerial accounting.
Source: Managerial

5. Evaluate a purchasing department’s performance

Evaluating internal department performance is managerial accounting’s role.
Source: Managerial

6. Estimate product cost for a new line of shoes

Internal product costing for new lines is managerial accounting.
Source: Managerial

7. Measure profitability of an individual store

Internal performance measurement (store - level profitability) is managerial.
Source: Managerial

8. Determine location and size for a new plant

Internal strategic planning (new plant decisions) uses managerial accounting.
Source: Managerial

Final Answers (in table form for clarity):

Business Decision	Primary Information Source
2. Determine whether to lend to a company	Financial
3. Prepare GAAP - based financial statements for creditors	Financial
4. Estimate profits from a new service opportunity	Managerial
5. Evaluate a purchasing department’s performance	Managerial
6. Estimate product cost for a new line of shoes	Managerial
7. Measure profitability of an individual store	Managerial
8. Determine location and size for a new plant	Managerial

Answer:

To solve this, we analyze each decision based on the purpose of managerial (internal, for planning/control) vs. financial (external, for reporting) accounting:

1. Prepare manufacturing budgets for the next year

Managerial accounting is used for internal planning (budgets).
Source: Managerial

2. Determine whether to lend to a company

Lenders use financial accounting (external reports) to assess risk.
Source: Financial

3. Prepare GAAP - based financial statements for creditors

Financial accounting follows GAAP for external stakeholders (creditors).
Source: Financial

4. Estimate profits from a new service opportunity

Internal planning (estimating profits for new opportunities) uses managerial accounting.
Source: Managerial

5. Evaluate a purchasing department’s performance

Evaluating internal department performance is managerial accounting’s role.
Source: Managerial

6. Estimate product cost for a new line of shoes

Internal product costing for new lines is managerial accounting.
Source: Managerial

7. Measure profitability of an individual store

Internal performance measurement (store - level profitability) is managerial.
Source: Managerial

8. Determine location and size for a new plant

Internal strategic planning (new plant decisions) uses managerial accounting.
Source: Managerial

Final Answers (in table form for clarity):

Business Decision	Primary Information Source
2. Determine whether to lend to a company	Financial
3. Prepare GAAP - based financial statements for creditors	Financial
4. Estimate profits from a new service opportunity	Managerial
5. Evaluate a purchasing department’s performance	Managerial
6. Estimate product cost for a new line of shoes	Managerial
7. Measure profitability of an individual store	Managerial
8. Determine location and size for a new plant	Managerial