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Chapter 1

COMM-2016EL Chapter Notes - Chapter 1: Investor Relations, Future Orientation, Economic Appraisal

Commerce and Administration
Course Code
Kayla Levesque

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Chapter 1: Maageet Accoutig &
Maageet Decisios
Management Accounting for Managers
Management accounting is user-driven, not data driven… It exists because managers require information to
make decisions. Accounting information systems are the means, and better decisions are the ends.
There is a difference between the term “data” and “information”. It is important to note that management
accounting deals with information systems and not data systems
To generate records of facts that are not used in a decision is to generate data
Once data have been used by a manager, then they become information
The study of management accounting has been organized into frameworks, the first of which focuses on the
types of decisions that must be made and categorizes those decisions into 3 categories…
1. Operational Control Decisions ensure that specific tasks are carried out effectively and efficiently
2. Management Control Decisions make sure that resources are used effectively & efficiently by the
managers of the organization
3. Strategic Planning Decisions focus on the objectives of the organization and the way resources are
acquired and employed
The second framework focuses on the characteristics of decisions, placing them on a continuum between
structured decisions & unstructured decisions:
Structured Decisions are those that are routine and normal, where the information requirements and
decision processes are relatively well understood
Unstructured Decisions are unique and uncommon, and thus the information and decision processes
need to be developed for that decision
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A Management Decision Process
1. Identify the problem or issue from this, determine what information you need to develop a solution to
the problem and what analysis will provide you with the information required
2. Perform the necessary quantitative and qualitative analyses
3. Identify alternative solutions to the problem alternative solutions must exist, because if there were only
one correct solution, the situation did not require a decision
4. Analyse and evaluate each alternative solution in terms of advantages/disadvantages, costs/benefits, and
5. Recommend one of the alternative solutions the rationale should focus on its advantages, and you
should be ready to explain why the disadvantages are insignificant or can be managed
6. Implement the recommendation may depend on the ability of the manager to change effectively the way
an organization operates
The Maageet Accoutat’s Role
Management Accounting the process of identifying, measuring, accumulating, analyzing, preparing,
interpreting, and communicating information that helps managers fulfill organizational objectives
The management accountant’s role includes:
1. Scorekeeping the accumulation and classification of information that enables both internal and
external parties to evaluate organizational performance
2. Attention Directing the reporting and interpreting of information that helps managers to focus on
operating problems, imperfections, inefficiencies, and opportunities. It is commonly associated with
current planning and control and with the analysis and investigation of recurring routine internal
accounting reports
3. Problem Solving aspect of accounting that involves the concise quantification of the benefits of
possible courses of action, often with recommendations as to the best procedure. It is commonly
associated with nonrecurring decisions those which require special accounting analyses or reports
Planning means setting objectives and outlining the means for their attainment
Accounting formalizes plans by expressing them in the language of figures as budgets
A budget is a quantitative expression of a plan of action as an aid to coordinating and implementing the
The budget is a forecast of costs. Each cost is projected considering trends, price changes, alterations in
product mix, specifications, labour methods,
and changes in production volume from month
to month
The budget is then formulated, and becomes
the manager’s target for the month
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