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ACC 406
Vincent Cappelli

thWednesday January 11 2012 Chapter 1 Introduction to Management Accounting What is Managerial Accounting managerial accounting is providing information for a companys internal users it is the firms internal accounting system it is designed to support the information that managers need it is not bound by any formal criteria such as GAAP or IFRS International Financial Reporting Standards managerial accounting has 3 basic objectives 1 Provide information for planning the organizations actions 2 Provide information for controlling the organizations actions 3 Provide information for making effective decisionsInformation Needs for Planning Control and Decision Making managerial accounting information is needed by a number of individuals in particular managers and empowered workers need comprehensive up to date information for the following activitiesPlanning requires setting objectives and identifying methods to achieve those objectivesEX a firm may set the objectives of increasing its short term and long term profitability by improving the overall quality of its productsControlling monitoring a plans implementation and taking corrective actions usually achieved by comparing actual performance with expected performanceEX managers may decide to let the plan continue as is take corrective action of some type to put the action back with the original planDecision Making process of choosing alternativesManagers cannot successfully plan or control the organization actions without making decisions regarding competing alternativesComparison of Managerial and Financial Accounting there are two kinds of accounting information systemsFinancial AccountingManagerial AccountingManagerial Accounting internal focus such as managers executives and workers there are no rules financial and non financial information deals with future strongly emphasizes information about future events it is broadFinancial Accounting external focus such as investors creditors customers suppliers and government must follow GAAP rules objective financial information it deals with historical orientation records and reports events that happened not as broad as managerial accounting self contained thWednesday January 11 2012Value Chain refers to the set of business functions that add value to an organizations products or services for a company to succeed all stages of the value chain add value to the final product value chain is a systematic approach to examine the development of a firms competitive advantage when value is built into each stage of a product or service this increases the total value delivered by the organization value chain includesDesignDevelopProduceMarketDeliver management accountants play a key role in delivering all value chain functions they provide estimated revenue and cost data for each stage of the products lifeThe Role of the Managerial Accountant managerial accountants must support management in all phases of business decision making as specialists in accounting they must be intelligent well prepared up to date with new developments and familiar with the customs and practices of all countries in which their firms operateStructure of the Company role of managerial accountants in an organization is one of support they assist individuals who are responsible for carrying out organizations basic objectives structure of company includesLine Position position that have direct responsibility for the basic objectives of an organizationEX vice presidents of manufacturing and marketing factory managers and assemblersStaff Position position that are supportive in nature and have only indirect responsibility for an organizations basic objectiveEX vice presidents of finance and human resources the cost accountant and the purchasing manager Controller the controller is often viewed as a member of top management team and is encouraged to participate in planning controlling and decision making activities controller has responsibility for both internal and external accounting requirementsTreasurer is responsible for the finance position specifically the treasurer raises capital and managers cash and investments treasurer may also be in charge of credit collection and insuranceManagerial Accounting Ethical Conduct and Social Responsibility objective of profit maximization should be constrained by the requirement the profits be achieved through legal and ethical means this has always been an implicit assumption of managerial accounting the assumption should be made explicitEthical Behaviour involves choosing actions that are right proper and just thWednesday January 11 2012 behaviour can be right or wrong proper or improper fair or unfair groups bears some responsibility for the well being of other members ethical behaviour includes 1 Competence 2 Integrity 3 Credibility 4 Confidentiality One of the biggest things 5 Fairness 6 Caring for othersChapter 2 Basic Managerial Accounting Concepts The Meaning and Uses of Cost most important task of managerial accounting is to determine the cost of product service customers and other items of interest to managersEX a small gourmet restaurant the owner needs to understand the breakdown of the restaurants costs into various categories cost categories include direct costs food and beverages and indirect costs includes laundry of linensCosts amount of cash or cash equivalent sacrificed for goods and or services that are expected to bring a current or future benefit to the organizationEX if a furniture manufacturer buys lumber for 10000 then the cost of lumber is 10000EX if the manufacturer trades office equipment at a value of 8000 for a forklift then the cost of the forklift is 8000 which is the value of the office equipment cost is a dollarmeasure of the resources used to achieve a given benefitas costs are used up in the production of revenues they are sold to expire Expired costs are called expenses on the income statement expenses are deducted from revenues to determine income aka profit revenue per unit is called pricePrice must be greater than cost in order for the firm to earn incomeAccumulating and Assigning Costs accumulating costs is the way costs are measured and recordedEX when a telephone bill comes into the company the bookkeeper records an addition to the telephone expense account and an addition to the liability account account payable that is how cost is accumulated accumulating costs tell the company what was spent assigning costs is the way that a cost is linked to some cost objectCost object is something for which a company wants to know the costEX of the total telephone expense how much was for sales department and how much was for manufacturing assigning costs tells the company why the money was spent
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