Managerial Accounting Notes.vs2.docx

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University of Toronto Scarborough
Financial Accounting
Michael Khan

Managerial Accounting NotesChapter 1 Managerial Accounting and Business EnvironmentDescription of what managers do and how managerial accounting can serve these needs The Chapter will highlight the key differences between financial and managerial accounting The importance of ethics for accountants is also covered and several basic managerial concepts important in todays organizations are discussed The Role of the Management Accountant in Value CreationManagerial Accounting is concerned with providing information to managersthat is people inside an organization who direct and control its operations In contrast Financial Accounting is concerned with providing information to shareholders creditors and others who are outside an organization Managerial accounting provides data that help organizations run more efficiently Financial accounting provides the scorecard by which a companys past performance is judged The Work of Managers and need for Managerial Accounting InformationManagers carry our three major activitiesPlanning involves selecting a course of actions and specifying how the action will be implemented Directing and Motivating involve mobilizing people to carry out plans and run routine operationsControlling involves ensuring that the plan is actually carried out and is appropriately modified as circumstances change A Strategy is a game plan that enables a company to attract and retain customers by distinguishing itself from competitors Planning An important part of planning is to identify alternatives and then to select from among the alternatives the one that best meets the organizations objectives Allimportant alternatives considered by management in the planning process have some effect on revenues or costs and management accounting data are essential in estimating those effects The plans of management are often expressed formally in budgets budgeting is a part of the planning process Budgets are usually prepared under the direction of the controller who is the manager in charge of the Accounting Department1 Managerial Accounting NotesDirecting and Motivating In addition to planning for the future managers must oversee daytoday activities and keep the organization functioning smoothly This requires motivating and directing peopleManagers assign tasks to employees arbitrate disputes answer questions solve onthespot problems and make many small decisions that affect customers and employees Controlling In the control function managers seek to ensure that the plan is being followed Feedback which signals whether operations are on track is the key to effective control In sophisticated organizations this feedback is provided by detailed reportsOne of these reports is called a performance report Performance reports suggest where operations are not proceeding as planned and where some parts of the organization may require additional attention The Planning and Control Cycle The planning and control cycle illustrates the smooth flow of management activities from planning through directing and motivating controlling and then back to planning againBusiness Plan New businesses typically formalize their strategic planning in the form of a business plan A business plan consists of information about the companys basic product or service and about the steps it will take to reach its potential marketThe plan includes information about production methods the competition the management team and details on how the business will be financed2
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