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Textbook Chapter 1-12 Summaries - Midterm or Final Review material Textbook: Managerial Accounting, Garrison, McGraw-Hill Ryerson Limited 14 page word document summarizing all the important topics covered in MGT223. No need to read the textbook if yo

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Kathy Falk

MGT223H5F Managerial Accounting I (Summer 2010) Textbook Chapter Notes Chapter 1: Managerial Accounting and the Business Environment Learning Objectives: Functions of Managers: planning, directing & motivating, controlling Financial Accounting: follows GAAP, limited set of documents, for external use by stakeholders of a company Managerial Accounting: does not follow GAAP, for internal use by managers to assist in planning, controlling and for decision-making. Role of management accountants: delegation, line & staff relationships, controller Ethics: SOX act Lean production: 5-step, pulls units through in response to customer orders Six sigma: process improvement method, relies on customer feedback and fact-based gathering and analysis techniques to drive process improvement Computer technology: e-commerce and enterprise systems Risk management: process used by a company to proactively identify and manage risks Financial Accounting vs Managerial Accounting: Financial Accounting Managerial Accounting Definition phase of accounting phase of accounting concerned with providing concerned with providing info to shareholders, info to managers for use in creditors and others outside planning and controlling the organization operations and for decision- making Users External people who make Managers who plan for and financial decisions control an organization Time focus Historical perspective Future oriented Emphasis Objectivity and Verifiability Relevance for planning and control Importance Precision of information Timeliness of information and non-monetary data Subject focus Summarized data for the Detailed segment reports entire organization are about departments, prepared products, customers and employees are prepared GAAP Must follow GAAP and Need not follow GAAP or prescribed formats any prescribed format Requirement Mandatory for external Not mandatory reports Work of Managers and their need for Managerial Accounting Information: Planning: selecting a course of action and specifying how the action will be implemented Directing and motivating: mobilizing people to carry out plans and run routine operations Controlling: ensuring that the plan is actually carried out and is appropriately modified as circumstances change. Strategy: game plan that enables a company to attract customers by distinguishing itself from competitors. Cost leadership strategy: emphasis is on cost efficiency; differentiate from competitors through lower prices established by low costs. Eg: Walmart Budget: detailed plan for the future, usually expressed in formal quantitative terms Business plan: consists of information about the companys basic product or service and about the steps to be taken to reach its potential market. Customer value propositions (a reason for customers to choose one companys product over another): Customer intimacy: we understand and respond to your individual needs better than our competitors. Eg: Tim Hortons Operational excellence: we can deliver products and services faster, more conveniently, and at a lower price than our competitors. Eg: Walmart Product leadership: we offer higher quality products and services than our competitors. Eg: BMW Control: the process of instituting procedures and then obtaining feedback to ensure that all parts of the organization are functioning effectively and moving toward overall company goals. Feedback: accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed Performance report: detailed report comparing budgeted data to actual data. Planning and control cycle: flow of management activities through planning (formulating long and short-term goals), directing and motivating (implementing plans) and controlling (measuring performance) and then back to planning (comparing actual to planned performances) again. Organizational Structure: Decentralization: delegation of decision-making authority throughout an organization by providing managers at various operating levels with the authority to make key decisions relating to their areas of responsibility Organization chart: visual diagram of a firms organizational structure that depicts formal lines of reporting, communication and responsibility between managers. Line: position in an organization that is directly related to the achievement of the organizations basic objectives. Staff: position in an organization that is only indirectly related to the achievement of the organizations basic objectives. Such positions are supportive in nature in that they provide service or assistance to line positions of other staff positions. Controller: manager in charge of the accounting department in an organization Chief Financial Officer (CFO): member of the top-management team who is given the responsibility of providing relevant and timely data to support planning and control activities and of preparing financial statements for external users. Corporate governance: system by which a company is directed and controlled Process Management: Business process: series of steps that are followed in order to carry out some task in a business Value chain: consists of the major business functions that add value a companys products and services Business functions making up the value chain: R&D, product design, manufacturing, marketing, distributing, customer service Raw materials (RM): materials that are used to make a product Work in process (WIP): inventories consisting of units of product that are only partially completed Finished goods (FG): inventories consisting of units of product that have been completed but have not yet been sold to customers Lean thinking model: five-step management approach that organizes resources around the flow of business processes and pulls units through in response to customer orders. Eg: Toyota 1. Identify value in specific products/services 2. Identify the business process that delivers value 3. Organize work arrangements around the flow of the business process 4. Create a pull system that responds to customer orders 5. Continuously pursue perfection in the business process Lean production results in lower inventories, fewer defects, less wasted effort and quicker customer response times. Just-In-Time (JIT): a pull system in the lean thinking model where production isnt initiated until a customer has ordered a product. Supply chain management: the coordination of business processes across companies to better serve end customers Six sigma: a process improvement method that relies on customer feedback and fact-based data gathering and analysis techniques to drive process improvement. It uses DMAIC to eliminate non-value-added activities and to improve processes. Aka zero defects. Eg: General Electric, Motorola DMAIC: Define: Establish the scope and purpose of the project. Diagram the flow of the current process. Establish the customers requirements for the project Measure: Gather baseline performance data related to the existing process. Narrow the scope of the project to the most important problems Analyze: Identify the root cause(s) of the problems identified in the Measure stage Improve: Develop, evaluate, and implement solutions to problems Control: Ensure that problems remain fixed. Seek to improve the new methods over time. Non-value-added activities: activities that customers are not willing to pay for because they add no value Enterprise system: computer application designed to overcome problems in data inconsistency and duplication by integrating data across an organization into a single software system Enterprise risk management: process used by a company to proactively identify and manage those risks E-commerce: business that is conducted using the internet. Recent growth in e-commerce because the Internet offers numerous advantages over more conventional marketplaces for many kinds of transactions. Total Quality Management (TQM): ensuring goods are of the best quality Re-engineering: innovation and design to the production process with a motive of improvement Globalization: advances in technology and transportation that create an international marketplace for Canadian businesses and consumers. Sarbanes-Oxley Act of 2002 (SOX): passed with the objective of improving the reliability of the financial disclosures provided by publicly traded companies.
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