The Role of the management accountant in value creation
Today’s management accountants are required to have competencies in cost management, performance measurement (financial and non-financial), process management and risk management as a result play a fey role in decision making across the various functional areas of an organization Managerial accounting: the form of accounting concerned with providing information to managers for use in planning and controlling operations and for decision making Financial accounting: the form of accounting concerned with providing information to shareholders, creditors, and others outside the organization The work of managers and their need for managerial accounting information Every organization has managers – someone must be responsible for making plans, organizing resoures, directing personnel, and controlling operations. Managers carry out three major activities:
Planning: developing objectives and preparing budgets to achieve these objectives Directing and motivating: mobilizing people to carry out plans and run routine operations Controlling: ensuring that the plan is actually carried out and is appropriately modified as circumstances change Strategy: a game plan that enables a company to attract and retain customers by distinguishing itself from competitors The reasons a company creates for customers to choose it over its competitor is called customer value proposition Customer value propositions fall into three categories:
Customer intimacy (i.e. Cisco systems, KEG steakhouse)
Operational Excellence (i.e. WestJet, Walmart)
Product Leadership (i.e. BMW, RIM)
An important part of planning is to identify alternatives and then to select from among the alternatives the one that best meets the organization’s objectives I.e. Metro Coffee Inc.’s objective is to make profits for the owners of the company by providing superior service at competitive prices in as many markets as possible. When making the choice of expansion: management must balance the expansion opportunities against the demands made on the company’s resources Top management looks at the sales volumes, profit margins, and costs of the company’s established outlets in similar markets Budget: a quantitative plan for the acquisition and use of financial and other resources over a specified future time period Controller: the manager in charge of the accounting department in an organization Directing and Motivating
In addition to planning for the future, managers must oversee day to day activities and keep the organization functioning smoothly Requires motivating and directing people, managers assign tasks to employees, arbitrate disputes, answer questions, solve on-the-spot problems and many small decisions that affect customers and employees Controlling
Control: those steps taken by the management that attempt to increase the likelihood that the objectives developed at the planning stage are attained and to ensure that all parts of the organization function in a manner consistent with organizational policies Feedback: accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed Performance report: a detailed report comparing budgeted data to actual data The results of managers’ activities
What the customer experiences doesn’t simply happen: it is the result of the efforts of managers who must visualize and fit together the processes that are needed to get the job done The Planning and Control Cycle
Planning and control cycle: the flow of management activities through planning, directing and motivating and controlling and then back to planning again Managerial accountants typically provide reports that help answer questions such as: How much does it cost to provide a particular good or service? How many units must be sold to break even?
The Business Plan
Includes information about production methods, the competition,...
Management accounting or managerialaccounting is the process of identifying, analyzing, recording and presenting financial information that is used for internally by the management for planning, decision making and control.In contrast to HYPERLINK "http://accountingexplained.com/financial/" financial accounting, managerialaccounting is concerned with providing helpful information and reports to internal users such as managers and entrepreneurs etc. so that they can control and plan the business activities. Few of the main areas, in which managerialaccounting is used are:Planning and Budgeting: Managers use managerialaccounting techniques to plan what to sell, how much to sell, what price is to be charged to reimburse the costs of production and also earn an optimal profit. Also they have to plan how to finance the operations and how to manage cash etc. This is very important to keep the business operations working smoothly. The HYPERLINK "http://accountingexplained.com/managerial/capital-budgeting/" capital budgeting and HYPERLINK "http://accountingexplained.com/managerial/master-budget/" master budget are the two important topics in this area.Decision Making: When managers have to decide whether or not to start a particular project, they need...
INTRODUCTION TO COST ACCOUNTING
1. Management accounting stresses the informational needs of internal users over those
of external users (the focus of financial accounting). Because of this perspective,
management accounting provides information in a format that is flexible and relevant
to a particular manager‟s usage. Financial accounting, on the other hand, must provide some uniformity in the manner in which information is presented for it to be
comparable among companies and in compliance with generally accepted accounting
2. It is more important to have legally binding cost accounting standards for defense
contractors than for other manufacturers because government contracts are often
awarded on a low-bid basis. Without legally binding cost accounting standards, different bidders could include costs in different categories, making the bids noncomparable. With specified cost accounting standards, there is a higher probability
(although not absolute certainty) that comparison among bids is consistent. Although
contracts for nongovernment manufacturers may be awarded on a bid basis, it is more
common in this arena to consider a wide variety of factors in addition to cost.
3. A mission statement is important to an organization because it provides a clearly
worded view of what...
...CHAPTER1MANAGERIALACCOUNTING, TYPES AND ETHICS.
1) ManagerialAccounting: Firms internal accounting system and designed to support the information needs of managers in order to make decisions. Not bound by GAAP.
a) Managerialaccounting has 3 objectives:
i) To provide information for planning organization actions
ii) To provide information for controlling organization actions.
iii) To provide information for making effective decisions.
b) Reports that help mangers that are nonfinancial are: managerial internal reports, corporate sustainability reports, social responsibility reports or citizenship reports.
c) Managerialaccounting concentrates on 3 elements: Planning, Controlling and decision making.
i) Planning: formulation of action to achieve particular goal. It requires setting objectives and identifying methods to achieve those goals
ii) Controlling: monitoring the plans and making sure that those plans are being implemented efficiently. Usually achieved by comparing actual performance with expected performance.
iii) Decision making: Choosing among competing alternatives. Goals of managerialaccounting are to supply information that facilitates decision making.
2) Financial accounting vs managerial...
...Slide 1-1Chapter1Accounting in Action
Financial Accounting, IFRS Edition Weygandt Kimmel Kieso
1. 2. 3. Explain what accounting is. Identify the users and uses of accounting. Understand why ethics is a fundamental business concept.
5. 6. 7. 8.
Explain accounting standards and the measurement principles.
Explain the monetary unit assumption and the economic entity assumption. State the accounting equation, and define its components. Analyze the effects of business transactions on the accounting equation. Understand the four financial statements and how they are prepared.
Accounting in Action
What is Accounting?
The Building Blocks of Accounting
The Basic Accounting Equation
Using the Accounting Equation
Who uses accounting data?
Ethics in financial reporting
Accounting standards Assumptions
Summary of transactions
Retained earnings statement Statement of financial position Statement of cash flows
What is Accounting?
The purpose of...
...Week 2 Assignment
Exercise 1-11. Managerialaccounting is concerned with providing information for the use of people inside the organization, whereas financial accounting is concerned with providing information for the use of people outside the organization.
2. Planning consists of identifying alternatives, selecting from amongst the alternatives the one that is best for the organization, and specifying what actions will be taken to implement the chosen alternative.
3. When directing and motivating, managers oversee day-to-day activities and keep the organization functioning smoothly.
4. The accounting and other reports coming to management that are used in controlling the organization are called feedback.
5. The delegation of decision-making authority throughout an organization by allowing managers at various operating levels to make key decisions relating to their area of responsibility is called decentralization.
6. A position on the organization chart that is directly related to achieving the basic objectives of an organization is called a line position.
7. A staff position provides service or assistance to other parts of an organization and does not directly achieve the basic objective of the organization.
8. The manager in charge of the accounting department is generally known as the controller.
9. The plans of...
...OL3210--Principles of ManagerialAccounting—unit 1 complete
The information found in the tables on page 48 would describe as primarily financial accounting data in nature. Financial accounting is not intended to satisfy all the data needs of business managers (Edmonds, Olds, Tsay, 2008). Whereas, managerialaccounting meets the needs of the internal users (the company). Study’s like this one is prepared for external parties such as shareholders and creditors, whereas managerialaccounting reports are prepared for managers in the organization. Financial accounting is predominantly concerned with reporting for the company as a whole, in contrast, managerialaccounting forces much more on the parts, or sections, of a company.
The chart’s on page 48 of our text was designed to compare Costco Wholesale Corporation data to Wal-Mart’s Sam’s Club data, therefore it is intended for external users instead of internal users. External users were comparing higher wages meant higher profits. The chart’s data proved Costco Wholesale showed a 25% profit gain the most recent quarter before March 3, in which the article was posted (Holmes, Zellner, 2004). Surprisingly, Costco’s high-wage approach had better results than Wal-Mart’s, lower wages. Employees stayed longer with the higher wage approach, therefore, employee...