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ACC 406 (130)
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Textbook Notes - All Assigned Chapters

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Department
Accounting
Course
ACC 406
Professor
Alison Beavis
Semester
Winter

Description
Chapter 1 - Introduction to ManagerialAccounting ManagerialAccounting: the provision of accounting information for a companys internal users - Not bound by any formal criteria such as GAAP or IFRS - Three objectives of managerial accounting: - To provide information for planning the organizations actions - To provide information for controlling the organizations actions - To provide information for making effective decisions - Companies release their information through CSR Reports - Examples: corporate sustainability report, social responsibility report, citizenship report - Uses of managerial accounting information: - Planning - Controlling - Decision making Planning: the detailed formulation of action to achieve a particular end - Requires setting objectives and identifying methods to achieve those objectives Controlling: monitoring a plans implementation and taking corrective action as needed - Usually achieved by comparing actual performance with expected performance Decision Making: the process of choosing among competing alternatives - An important role of managerial accounting is to supply information that facilitates decision making FinancialAccounting: primarily concerned with producing information for external users (investors, creditors, suppliers, government agencies, labour unions) - This information is used for investment decisions, stewardship evaluation, monitoring activity, regulatory measures - Managerial accounting produces information for internal users (managers, executives, workers) - Differences between managerial and financial accounting: - Targeted users: internal vs external users - Restrictions on inputs and processes: unlike financial accounting, managerial accounting has no official body that prescribes the format, content, and rules for selecting inputs and processes and preparing financial reports - Type of information: in managerial accounting, information can be financial or non- financial and may be more subjective in nature - Time orientation: managerial accounting strongly emphasizes providing information about future events - Degree of aggregation: managerial accounting provides and needs detailed information - Breadth: managerial accounting is more broad Activity Based Costing (ABC): a system that accumulates overhead costs for each of the activities of an organization and then assigns the costs of activities to the products, services and other costs that caused those activities - 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 Customer Value: difference between what a customer receives and what the customer gives up when buying a product or service - Firms choose one of the two general strategies to increase customer value and create a sustainable competitive advantage: - Cost leadership: to provide the same or better value to customers at a lower cost - Superior products through differentiation: to provide something to customers not provided by competitors Product Life Cycle: a product progresses through a series of stages: conception, introduction into the market, growth, maturity, decline, withdrawal from the market Value Chain: the set of business functions that add value to an organizations products or services - Asystematic approach to examining the development of a firms competitive advantage - Value chain primary activities: - Inbound logistics: raw materials and goods are received from the companys suppliers - Operations: goods are manufactured or assembled - Outbound logistics: sending finished goods to wholesalers, retailers, or the final consumer - Marketing and sales: developing a marketing communications and promotions mix to meet the needs of targeted customers - Service: providing customers with installation, after-sales service, complaint handling, etc. - Value chain support activities: - Procurement: securing the lowest prices for inputs of the highest quality, and deciding which components or operations will be provided in-house and which will be outsourced - Technology development: innovating to reduce costs (sustaining competitive advantage through lean manufacturing, customer relationship management, etc.) - Human resource management: effectively managing recruitment, selection, training, development, etc. - Developing infrastructure: includes strategic planning in terms of structuring the firms reporting, planning, control, management information systems, etc. Continuous Improvement: the continual search for ways to increase the overall efficiency and productivity of activities by reducing waste, increasing quality, and managing costs Total Quality Management: a management philosophy in which manufacturers strive to create an environment that will enable workers to manufacture perfect (zero-defect) products LeanAccounting: organizes costs according to the value chain and collects both financial and non-financial information - One of the recent tasks of managerial accountants is to help carry out the companys enterprise risk management (ERM) approach - ERM is a formal way for managerial accountants to identify and respond to the most important threats and business opportunities facing the organizations Structure of the company: Line Positions: 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 Controller: the chief accounting officer in an organization - Supervise all accounting functions and reports directly to the general manager and chief operating officer (COO) - Often viewed as members of the top management team and are encouraged to participate in planning, controlling, and decision-making activities - Has the responsibility for internal and external accounting requirements Treasurer: responsible for the finance function - Raises capital and manages cash and investments Sarbanes-OxleyAct (SOX): established stronger government control and regulation of public companies in the United States - Applies to publicly traded companies - Led to increased attention to corporate ethics Publicly Traded Companies: companies that issue stock traded on U.S. Stock exchanges to which the SOX applies - Internal control is a process put into place by management and the board of directors to ensure that objectives are achieved in the areas of effectiveness and efficiency of operations reliability of financial reporting Ethical Behavior: involves choosing actions that are right, proper and just - Ten core values of ethical behavior: - Honesty - Integrity - Promise keeping - Fidelity - Fairness - Caring for others - Respect for others - Responsible citizenship - Pursuit of excellence - Accountability - Companies with a strong code of ethics can create strong customer and employee loyalty - When ethical dilemmas arise, employees frequently dont realize - That such a dilemma has arisen - The correct action that should be taken to rectify the dilemma - Canadian accounting bodies: - Canadian Institute of ChartedAccountants (CICA) - Certified ManagementAccountants (CMA) - Certified GeneralAccountants (CGA) CharteredAccountant (CA): accountant who works as a business professional in public practice, industry, government, or education Chapter 2 - Basic ManagerialAccounting Concepts Cost: the amount of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization - The dollar measure of the resources used to achieve a given benefit Expenses: costs that are used up in the production of revenues (expired costs) Price: revenue per unit - Revenue and price are the same - Price must be greater than cost in order for the firm to earn income Accumulated Costs: the way that costs are measured and recorded - Tells the company what was spent Assigning Costs: the way that a cost is linked to some cost object - Tells the company why the money was spent Cost Object: any item such as a product, customer, department, project, geographic region, plant, and so on, for which costs are measured and assigned - Systems that are structured to measure and assign costs to entities Direct Costs: costs that can be easily and accurately traced to a cost object Indirect Costs: costs that cannot be easily and accurately traced to a cost object Allocation: an indirect cost is assigned to a cost object by using a reasonable and convenient method Variable Costs: costs that increase in total as output increases and decreases in total as output decreases Fixed Costs: costs that dont increase in total as output increases and doesnt decrease in total as output decreases - Committed fixed costs cannot be avoided - Discretionary fixed costs can be modified - Most costs are neither fixed not variable, they are mixed, having both variable and fixed components Opportunity Cost: the benefit given up or sacrificed when one alternative is chosen over another Products: goods produced by converting raw materials through the use of labour and indirect manufacturing resources, such as the manufacturing plant, land and machinery Services: tasks or activities performed for a customer or an activity performed by a cust
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