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Chapter 1-8

AFM102 Chapter Notes - Chapter 1-8: The Keg, Management Accounting, Cisco Systems


Department
Accounting & Financial Management
Course Code
AFM102
Professor
Khim Kelly
Chapter
1-8

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The Role of the Management Accountant in Value Creation
Managerial accounting: form of accounting concerned with providing information to managers for
use in planning & controlling operations, & for decision making
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Financial accounting: form of accounting concerned with providing information to external users
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The Work of Managers and their Need for Managerial Accounting Information
Planning: developing objectives & preparing budgets to achieve these objectives
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Budget: quantitative plan for the acquisition & use of financial & other resources over a specified
future time period
Prepared under direction of controller (manager in charge of acct dept in an organization)
Directing & motivating: mobilizing people to carry out plans & run routine operations
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Controlling: ensuring that the plan is actually carried out & is appropriately modified as
circumstances change
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Feedback: accounting & other reports that help managers monitor performance & focus on
problems and/or opportunities that might otherwise go unnoticed
Performance report: detailed report comparing budgeted data to actual data
Strategy: game plan that enables a company to attract & retain customers by distinguishing itself
from competitors
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Reason for customers to choose co. over competitor -> customer value propositions
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3 broad categories:
Customer intimacy
Understanding and responding to needs better than competitors
e.g. Cisco Systems, The Keg Steakhouse & Bar, & Dell Corporation
Operational excellence
Delivering products & services faster, more conveniently, & at a lower price than competitor
e.g. WestJet, Walmart, & CNR
Product leadership
Offering quality products than competitors
e.g BMW & RIM
May offer combination of these 3 propositions, one usually outweighs the others (importance)
The Planning and Control Cycle
Flow of management activities through planning, directing & motivating, & controlling, & then back
to planning again (Exhibit 1-1 (p.6)) -> all activities involve decision making
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The Business Plan
Involves formalization of strategic planning
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Consists of info about the company's basic product/service & the steps it will take to reach its
potential market
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Includes info about production methods, the competition, the management team, & details on how
the business will be financed
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Key document for the organization's internal management
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Exhibit 1-2 (p.6)
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Length varies with the nature & complexity of the venture
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Must be flexible to adapt in response to market changes
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Effective -> should encourage a shared vision with clear targets & well-defined performance
measures
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Typical plan -> desc of proposed/existing company, its products/services, & marketing plan
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Operational plans -> details of the financial resources required & forecasted revenues & expenses
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Comparison of Financial and Managerial Accounting
Accounting -> recording, estimating, organizing, summarizing (financial & operational data)
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Chapter 1: Managerial Accounting and the Business Environment
January-07-13
10:30 AM
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