I. IntroductionPg. 2
II. Accounting OverviewPg. 3
III. Financial (Cost) & Management AccountingPg. 4
IV. Management Accounting role in the OrganizationPg. 6
V. Communication and presentationPg. 7
VI. Management ProcessPg. 8
VII. ConclusionPg. 10
VIII. End NotesPg. 11
IX. Bibliography/Further ReadingsPg. 12
As a business owner, manager, and director of various business entities that I manage, I can very much relate to many authors, business people, or individuals who appreciate the information derived from Management accounting. To describe management accounting in my own words, I would say; it is the accounting that describes the “what, where, when, why, and how” about the business. It is a domain that can lead a business to success, if the translations of it are utilized to their full potential. The intent of this paper is to share lessons and thoughts of many teachers, writers, and authors of management accounting. There is no need to “re-invent the wheel” per say as the basics of requesting and obtaining management accounting information is more or less the same for everyone. However, what cannot be described or written with certainty is what the organization, business, or individual chooses to do with the information. Such decisions and actions remain to be seen as outcomes afterwards. Managers or people inside the organization who direct and control its operations rely on managerial accounting information and other financial insights in order to plan and achieve business success. Wikipedia defines management accounting or managerial accounting as concerned with the provisions and use of accounting information to managers within organizations, to provide them with a basis to make informed business decisions that will allow them to be better equipped in their management and control functions. Management accounting information is primarily forward-looking, instead of historic. It is a model based with a degree of abstraction to support decision making generically, instead of case based. It is for manager use within the organization, instead of being intended for use by shareholders, creditors, and public regulators. It is usually confidential, instead of publicly reported. It is computed by reference to the needs of managers, often using management information systems, instead of by reference to general financial accounting standards.1 The American Accounting Association refers to accounting as “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. The accounting information can be both financial and non-financial in order for the decision makers, information users, and management to make the best possible decision.”2
Accounting is a language that through the translation can communicates economic information to the organization’s managers, shareholders, potential investors, employees, creditors and the government. “Shareholders ask for information on the value of their investments and profits. Employees need information in order to be sure that the company is capable of meeting and avoiding redundancies. Creditors and banks request information on the company's ability to sustain its financial obligations and liabilities. Government agencies collect accounting information necessary to establish macroeconomic development policy.”3 “Managers of specific business oftentimes need or desire far more detailed information. This information must be tailored to specific decision-making tasks of managers, and its structure becomes more “free formed." Such managerial accounting information tends to focus on products, departments, and activities. In this context, the management process is intended to be a broad reference to encompass marketing, finance, and other...
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...
Part 1 of Final Project
Strategic business decisions are essential to achieve the long-term goals of the company. Strategies are mostly concerned with the scope of business activities and growth in the business (Rosenzweig, 2013). They form the fundamental basis for any organization, which is based on the facts and in-depth analysis. Historical trends in the financial statement provide for guidance about the performance of the company which are essential in the strategic decision making process.
Earnings, liquidity, credit worthiness, profit generating capacity, cash flow generation and so on of a company play a significant role in strategic decision making (businesscasestudies.co.uk). Finance is the main basis for any decision making, as the company should be in a position to raise the required funds to meet the growing requirements. The financial health and condition of a company can be better understood by checking out the past performance. Historical trend provides for guidance about the trends in sales, earnings and so on which is essential for making important decisions like international ventures, mergers and expansion.
For any business to be successful it has to grow or expand in order to remain competitive in the market. Before making any such investment...
Final Essay – ManagerialAccounting
Discussing the importance of managerialaccounting for managers and business leaders who are not accountants. Understanding accounting principles, job costing, decisions for capital investments, and central versus decentralized business units.ManagerialAccounting
In business, accounting principle is necessary for report annual and quarterly reports, IRS, shareholders, creditors. We can understand how we earning money through out the accounting method. Unfortunately all managers and leaders are not accountant. Then what should we do? I want to talk about that subject.
ManagerialAccounting is the provision of accounting information for a company’s internal users.Unlike financial accounting, managerialaccounting is not bound by any formal criteria such as generally accepted accounting principles. The detailed formulation of action to achieve a particular end is the management activity called planning. The managerial activity of monitoring a plan’s implementation and taking corrective action as needed is referred to as controlling. Financial...
...obtain benchmark ratios in the whole industy to enable more thorough comparisons; Finally, though in the same industries, operating strategies and accounting methods can vary from company to company, for instance, aggresive revenue recognition strategy can result in different ratios compared to prudent strategy. Overall more facts should be incorporated into the analysis to gain a more practical view.
Ratio analysis helps provide a deeper insight into financial statements (Damitio et al. 1995), allows comparisons among companies (Potter et al. 2010), cultivates a more thorough understanding of company’s performance, detecting errors (Roxas 2011) and indicating future improvements (Pietrovito 2014). thus is considered as an extremely useful tool to both internal and external accounting information users.
Information in cash flow statement can offer a different view because it is somehow under cash accounting instead of accrual accounting, which is quite different from other three main financial statements, More importantly, as cash flows is hard to be manipulated (Doran 2002), it actually offers a more reliable image of the company’s performance. Obviously, investors would not invest in a company by which the cash flow generated is not available to pay dividends or interests. Therefore, it is suggested that accounting infomation users should go beyond ratios (Libby 1985) and consider...
Chapter # 01
01) How does managerialaccounting differ from financial accounting?
A: Managerialaccounting is concerned with providing information to managers for use inside the organization. Financial accounting is con¬cerned with providing information to stockhold¬ers, creditors, and others outside of the organi¬zation.
02) Pick any major television network and describe some planning and control activities that its managers would engage in.
A: Five examples of planning activities include:
1. Estimating the advertising revenues for a future period.
2. Estimating the total expenses for a future period, including the salaries fo all actors, news reporters and sportscasters.
3. Planning how many new television shows to introduce to market.
4. Planning the network’s advertising activities and expenditures.
5. Planning each television show’s designated broadcast time.
Five examples of controlling activities:
1. Comparing the actual number of viewers for each show to its viewership projections.
2. Comparing the actual costs of running a production studio to the budget
3. Comparing the revenues earned from broadcasting a sporting event to the costs incurred to broadcast the event.
4. Comparing the actual costs of producing a made for...
...PROCESSES AND FUNCTIONS
PLANNING AND MANAGERIALDECISION-MAKING
A TOPIC PRESENTATION
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
IN MGT. 201 (THEORY AND PRACTICE OF MANAGEMENT)
OUTLINE OF REPORT
1. Overview of Goals & Plans, their Purpose
a. What is a Goal?
b. What is a Plan?
c. What isPlanning?
2. Level of Goals and Plans and their importance.
3. Purposes of Goals and Plans.
4. The Organizational Planning Process
5. Types of Goals and Plans
6. Aligning goals with strategy maps
7. Strategy Map for Aligning Goals
8. Organizational Mission
9. Operational Planning
10. Characteristics of Effective Goal Setting
11. Management by Objective
12. Model of the MBO
13. MBO Benefits and Problems
14. Single-use and Standing Plans
1. Steps in Planning
2. Planning in Turbulent Times
a. Contingency Planning
b. Building Scenarios
c. Crisis Planning
d. Planning for High Performance
e. Performance Dashboard for PlanningMANAGERIALDECISION MAKING
1. Types of Decision and Problems
a. Decision Making Defined
...Reducing-balance depreciation creates the larger expense, while straight-line
depreciation creates the larger tax savings 5. Current accounting standard AASB 116 indicates that the costs of intangible assets
with an indefinite life, such as goodwill, should:
a. not be amortised, but should be reviewed annually for impairment
b. be reported on the statement of retained earnings in the year in which acquired
c. be amortised over a reasonable period of time, not to exceed 40 years
d. be debited to an expense account entirely in the year in which acquired
6. Information for Everett Evacuators for 2013 and 2012 is presented below. Everett
uses the straight-line depreciation method.
Non-current assets $250 000 $190 000
Accumulated depreciation 100 000 85 000
Depreciation expense 62 500 47 500
Total revenues 1 000 000 900 000
Total assets 625 000 475 000
Using the data for 2013, determine the average useful life of Everett's non-current assets
rounded to one decimal place.
a. 1.6 years
b. 2.5 years
c. 4.0 years
d. 10.0 years
7. On 1 July 2013, XYZ sold a piece of equipment for $30 000 which it had used for
several years. The equipment had cost $45 000 and its accumulated depreciation
amounted to $20 000 at the time of the sale. What are the net effects on the
accounting equation of selling the equipment?
a. Assets and equity increase $30 000
...not have this understanding and what benefits it has for guiding managers to understand the changes and effects different future business decisions and alteration of those decisions have on the expenses and profit but. Although there are benefits to finding and fully understanding these relations there might be problems on the way which will be discussed further on.
After reaching an understanding about the relationship between costs and business activities and analyzing cost behaviors, we could then use those information for predicting future profit changes due to changes in volume of activity, costs and prices of products. What effects can this manufacturing company expect on their profit if they add a new production line or they alter the machines and variable expenses change? All these questions are addresses using managerialaccounting technique called cost volume profit.
2-1 Cost Behavior, benefits and difficulties ahead
Change in organizations activity like designing or producing new type of clothing can affect costs of this manufacturing company. The relationship between costs and activity is called cost behavior or cost function. Providing knowledge of cost behavior helps the managers to make more accurate cost predictions. Which ultimately serves as a tool for managers in this organization for planning, controlling and decision making. Which needs the prediction of costs,...