BU247 Chapter Notes - Chapter 1: Pdca, Management Accounting, Financial Statement

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Chapter 1: How Management Accounting Information Supports Decision Making
Management Accounting Information
- Institute of Management Accountants has defined management accounting as:
o Profession that involves partnering in management decision making, devising planning and performance systems,
and providing expertise in financial reporting and control to assist management in the formulation and
ipleetatio of a orgaizatio’s strategy
- Examples of mgt accounting info:
o Reported expense of an operating department
o Cost of producing a product
o Cost of delivering a service
o Cost of performing an activity/business process
o Cost of serving a customer
Financial vs Management Accounting
Financial Accounting
Management Accounting
- Retrospective (backwards/what happened in past)
- Primarily oriented to external stakeholders (investors,
creditors, regulators + tax authorities)
- Stresses the form in which it is communicated
(consistent w rules like IASB)
- Both retrospective + prospective
- Primarily oriented to needs of employees and managers
- No prescribed from or rules about its content
Changing Focus
- Early 19th century systems to measure cost of producing individual products
- Middle 19th century railroads first to develop + use financial stats to asses & monitor performance
Andre Carnegie developed detailed cost systems that gave him comp. adv
- Early 20th century DuPont + GM expanded focus to planning and control
- 97’s Japanese manufacturers developed new tools to report on quality, service, customer, and employee performance
Strategy
- Management accounting discipline that helps enterprise to develop and implement its strategy
- Strategy = organization making choices about what it will or wont do
- As strategy gets executed, mgt accounting info provides feedback
Plan-Do-Check-Act Cycle or Deming Cycle
- Developed by quality expert, W. Edwards Deming
- A systematic and recursive way to develop, implement, monitor, evaluate and change a course of action
1) Plan
- defies orgaizatio’s purpose and selects the focus and scope of its strategy
o identify objectives
o choose course of action to achieve the desired objectives
2) Do
- involves implementation of a chosen course of action
3) Check
- measuring + monitoring performance and taking short-term actions based on measured performance
o monitor results of implanted course of action
o evaluate results by comparing them w results expected when plan was developed
4) Action
- managers taking action to lower costs, change resource allocations and improve allocation
o maintain current direction if results are acceptable
o or return to the plan stage to develop + implement an alternative course of action
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Document Summary

Chapter 1: how management accounting information supports decision making. Examples of mgt accounting info: reported expense of an operating department, cost of producing a product, cost of delivering a service, cost of performing an activity/business process, cost of serving a customer. Primarily oriented to external stakeholders (investors, creditors, regulators + tax authorities) Stresses the form in which it is communicated (consistent w rules like iasb) Primarily oriented to needs of employees and managers. No prescribed from or rules about its content. Early 19th century systems to measure cost of producing individual products. Middle 19th century railroads first to develop + use financial stats to asses & monitor performance. Andre carnegie developed detailed cost systems that gave him comp. adv. Early 20th century dupont + gm expanded focus to planning and control (cid:1005)97(cid:1004)"s japanese manufacturers developed new tools to report on quality, service, customer, and employee performance. Management accounting discipline that helps enterprise to develop and implement its strategy.

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