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ACC 406
Alison Beavis

Chapter 1 Meaning of managerial accounting Managerial accounting: the provision of accounting information for a companys internal users. Not bound by any formal criteria such as the GAAP Three broad objectives: o To provide information for planning the organizations actions o To provide information for controlling the organizations actions o To provide information for making effective decisions Many companies are deciding to publicly release large quantities of managerial accounting information through optional reports known as: o Corporate sustainability reports o Social responsibility reports o Citizenship reports Information Needs of Managers and Other Users Managers/Empowered workers need comprehensive, up to date information for the following activities: 1. Planning: The detailed formulation of action to achieve a particular end. Requires setting objectives and identifying methods to achieve those objectives. 2. Controlling: The managerial activity of monitoring a plans implementation and taking corrective action as needed. 3. Decision making: Process of choosing among competing alternatives Managerial Accounting vs Financial Accounting Managerial accounting Financial accounting Targeted Users Internal Users External users Restrictions on Not subject to requirements of the GAAP. Inputs and processes are restricted (set No mandatory rules by the SEC and the FASB) inputs/process Type of (non)financial information ; may be much Produce objective and verifiable financial information more subjective in nature information due to the restrictions imposed Time orientation Uses the information from financial acc. To Historical orientation; records events that provide information for future events have already occurred. Degree of Provides measures/internal reports used to Focuses on overall firm performance, aggregation evaluate the performance of entities, providing a more aggregated viewpoint managers Breadth Broad More self-contained New methods of costing products and services Activity based costing(ABC): improves costing accuracy by emphasizing the cost of the many activities or tasks that must be done to produce a product or offer a service. Strategic Positioning 1. Cost leadership strategy: to provide the same or better value to customers at a lower cost than competitors 2. Differentiation strategy: strives to increase customer value by providing something to customers not provided by competitors Value chain Design Develop Produce Market Deliver Cross-Functional Perspective Management accountant must understand many functions of the business to manage the value chain A decision affecting one function affects the others This perspective allows management to see the big picture and o Increase quality, reduce time, and improve efficiency Time as a Competitive Element Time is crucial in all phases of the Value Chain Companies try to eliminate non-value-added time Managers must be able to respond quickly and decisively to changing market conditions Efficiency Both financial and nonfinancial measures are needed Cost is a critical measure of efficiency To be effective, cost must be properly o Defined o Measured o Assigned Structure of the company Line position: positions that have direct responsibility for the basic objectives of an organization Staff positions: Positions that are supportive in nature and have only indirect responsibility for an organizations basic objectives. o Controller, Chief accounting officer Responsible for: Internal auditing, Cost Accounting, Financial Accounting, and Systems accounting o Treasurer Raises capital and managers cash and investments Responsible for credit & collection and insurance Process-Value Analysis Focuses on cost reduction instead of cost assignment Emphasizes the maximization of system-wide performance Concerned with: o Driver analysis o Activity analysis o Performance measurement Ethical behavior Ethical behavior: involves choosing actions that are right, proper, and just. 10 core values: 1. Honesty 6. Caring for others 2. Integrity 7. Respect for others 3. Promise keeping 8. Responsible citizenship 4. Fidelity 9. Pursuit of excellence 5. Fairness 10. Accountability 11. 12. Accounting Designations Chartered Accountant CA
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