Notesale: Turn your study into money

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Contents
 What is accounting?
 Financial accounting
 Management Accounting
 Management Accounting: Definition
 Cost Management
 Work of Management
 Planning
 Directing and Motivating
 Controlling
 Planning and Control Cycle:
 Managerial vs
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It exists to provide information for the
end-user
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 The process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of
information
...
Its main focus is on external reporting to a number of
groups
...


Management Accounting
 Measures, analyzes, and reports financial and nonfinancial information
 Helps management in the processes of decision-making, planning and
control, etc
...


Management Accounting: Definition
“Management accounting is the application of professional
knowledge and skill in the preparation and presentation of
accounting information in such a way as to assist management in the
formulation of policies and in planning and controlling the operations
of the organization
...

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Employee work assignment
Routine problem solving
Conflict resolution
Effective communication

Controlling
• This ensures that plans are being followed
...
Financial accounting

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GAAP* - Generally Accepted Accounting Principles

Limitations of Financial Accounting
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Shows only overall performances
Historical in nature
No performance appraisal
No material control system
No labor cost control
No proper classification of costs
No analysis of losses
Inadequate information for price fixation
Fails to supply useful data to management

Strategic Decisions
 Strategy specifies how an organization matches its own capabilities with
the opportunities in the marketplace to accomplish its objectives
 Strategic cost management describes cost management that specifically
focuses on strategic issues
 Companies follow one of the two broad strategies:
◦ The cost leadership strategy
◦ The product differentiation strategy

Strategic Decisions and the Management Accountant
 Management accounting information helps managers formulate strategy by
identifying:
◦ Most important customers
◦ Substitute products that exist in the marketplace
◦ Critical capability
◦ Funds available or needed

Value Chain
 Sequence of business functions in which customer usefulness is added to
products
 Different companies create value in different ways—cost and efficiency,
quality, innovation, building consumer brand, etc
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They are:

Supply-Chain Analysis
 Parts of the value chain associated with producing and delivering a product
or service
 Describes the flow of goods and services from initial sources of materials
and services to the delivery of products to customers, regardless of the
organization in which these activities occur

Sustainability and Key Success Factors
 Companies use the value chain and supply chain to deliver their customers
with ever-improving levels of performance regarding:
◦ Cost and efficiency
◦ Quality
◦ Time
◦ Innovation

Sustainability
 It refers to the process of development and implementation of strategies to
achieve long-term financial, social, and environmental performance
 Sustainability performance is important to companies for several reasons:
◦ Investors

◦ Employees
◦ Customers
◦ Social responsibility

Financial Accounts

Management Accounts

The Management Accounting consists of four essential tasks:
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Cost determination
Cost control
Performance evaluation
Supplying Information for Planning and decision making

The purpose of Management Accounting system
 To provide information about product costing to be used in financial
statements
 To provide information for planning , controlling and organizing
 To provide relevant , reliable and timely information
 To introduce cost effective appropriate system for the organization
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They are:
◦ Employ a cost–benefit approach to make resource-allocation
decisions
◦ Give full recognition to behavioral and technical considerations
◦ Use different costs for different purposes

Ethics of Management Accounting
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Basic foundation of any well-functioning economy
Principles and values that are followed by an organization
Prevent malpractices in financial transactions
Promote trust and loyalty of customers and employees of an organization



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