Textbook Notes (368,123)
Canada (161,661)
Management (848)
MGT323H5 (3)
Chapter 1

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Kathy Falk

• Cost accounting measures and reports financial and nonfinancial information related to the costs of acquiring and using resources. Cost accounting reports show how costs accumulate as corporations use resources to produce and sell their products and services. • Cost management includes activities of identifying, reporting, and analyzing all costs of operations • Financial accounting focuses on reporting to external parties such as investors, government agencies, banks, and suppliers. The goal is to present fair information to external parties of how business activities during a specific time period affected the economic health of a company. This is called economic substance which is the financial outcome of all the different types of business transactions that happened. Financial accountants report financial outcomes based on GAAP. Reports formatted in a way similar to balance sheets, income statements, and statements of cash flows are common to both management accounting and financial accounting. • Management accounting measures analyzes and reports financial and nonfinancial information to internal managers. The goal is to use past performance to predict the future. The internal reports should inform manages of the financial results of actual operations and show how activities can be changed to affect and improve what will happen in the future. Operating Decisions and Management Accounting • Operations refer to the activities that convert various resources into a product or service ready for sale • Obtaining and converting resources creates costs that cannot be recovered until a sale is made • Business operations are complex sets of activities, and to maximize profit considerable information, analyses and decision making is required in advance of actual action. • Once a plan is implemented most operations run with little intervention from managers • Operating decisions are needed when exceptions arise, such as supplies of raw materials fail to be delivered, workers go on strike, or machines break down Strategic Decisions and Management Accounting • Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace and formally communicates how it will compete • Examples include cost leadership or value leadership by means of product (service) differentiation • Pursuing the most appropriate strategy sustains competitive advantage for each type of company Value Chain • Value chain Is the sequence of business functions in which customer usefulness is added to products and services • The flow of costs incurred in a corporation can be classified in the value-adding activities of r&d, design, production, marketing, distribution, and customer services Supply Chain • supply chain is one way companies can implement strategy, cut costs and create value • supply chain describes the flow of goods, services and information from their initial sources to the delivery of products and services to consumers, regardless of whether those activities occur in one or more organization Key Success Factors • Key success factors are those activities that are essential to successful corporate performance and include: o cost and efficiency o quality: TQM which includes designing products or services to meet the needs and wants of customers, producing products with zero defects and waste, maintaining low inventories o time: increasing the pace of technological innovation o innovation: constant flows of innovative products • The goal of a company is to continuously improve its critical operations - such as on-time arrival for WestJet, customer access for online auctions at eBay, etc. 5-Step Decision Making Process 1. Identify the problem and uncertainties 2. Obtain Information 3. Make predictions about the future 4. Decide on one of the available alternatives - Steps 1-4 can be considered planning - Planning is a purposeful analysis of information to select and rank in importance the goals of an organization. - The most important planning tool is a budget. Budget is a quantitative expression of management’s proposed plan of action 5. implement the decision, evaluate performance, and learn - control compromises taking actions that implement the decision, measuring and evaluating performance, and providing feedback Key Management Accounting Guidelines and Organization Structure  3 guidelines that help management accountants provide the most value to their companies in strategic and operational decision making o Use a cost-benefit approach
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