Jan 30 – Management Accounting
- Focuses on the internal users in the firm.
External Decision Makers
– Statements based on a format, standards, specific rules
Internal Decision Makers
– Reply to anyone in the company that need information for whatever reason
– Not limited to accountants: can be for anyone from entry-level to executive
decisions to make short-term or long-term decisions. eg. Long term: should
the factory close?
– Qualitative information as well as quantitative. As opposed to External
accounting, in management accounting, qualitative factors are often as
important as the quantitative
– No rules – standards are made so the company can do the best that it can
Processes of Management
– Even if you are an accountant, you will always have some function of control
over your job.
– Regardless of what area you are in, some, if not all of the processes of
management will be used.
Planning – often 3-5 years
– A strategic initiative is often unreachable.
– Planning supports the strategy.
1. Identify alternatives
2. Select alternative – based on what your resources are.
3. Develop budgets – take the lofty, long term strategy, break it down into
more manageable pieces.
Directing and Motivating
– Everyday activities – working towards achieving the budget goal
– Who does the work? How do I schedule work? How do I deal with work
– Executive team often delegates work to other people in a 'lower' position.
Hierarchy – direct manager of the department often handles day-to-day
– Feedback measures by taking information
– Could be qualitative
– Questioning if resources are in the right place, motivating people, putting
people in the right jobs.
– Non-profit organizations often do not have time to determine this
*Comparison of Financial and Managerial Accounting Four-Step Framework for Decisions
– Decisions are based on what is best for the company.
Specify Problem and Goals
– Goals Vary – making money may not be the company goal eg. It may to be
own their own business
– Decisions require that goals are set.
Janice is traveling to see a friend in New York next month and she is trying to
decide whether to fly or take the train. She found a round-trip airline ticket for