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Chapter 1

Chapter 1 - ACTG 2020.docx

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Department
Accounting
Course
ACTG 2020
Professor
Sylvia Hsingwen Hsu
Semester
Fall

Description
Chapter 1 – ACTG 2020 THE ROLE OF THE MANAGEMENT ACCOUNTANT IN VALUE CREATION  Financial mgmt. accountants are required to have competencies in cost mgmt., performance measurement (financial and non-financial), process mgmt. and risk mgmt.  They play a key role in decision making across the various functional areas of an orgs  Code of ethics for mgmt. accountants contains standards related to competence, confidentiality, integrity, and credibility  Managerial accounting  is concerned with providing information to managers (people inside the orgs who direct and control its operations) whereas financial actg is more concerned with providing info to shareholders, creditors, and others who are outside the orgs THE WORK OF MANAGERS AND THEIR NEED FOR MANAGERIAL ACTG INFO  Managers usually carry out three major activities  planning, directing and motivating, and controlling  Planning  involves selecting a course of action and specifying how the action will be implemented  Directing and motivating  involves mobilizing people to carry out plans and run routine operations  Controlling  involves ensuring that the plan is actually carried out and is appropriately modified as circumstances change  Strategy  “game plan” that enables a company to attract and retain customers by distinguishing itself from competitors  Customer value proposition  reason for customers to choose it over a competitor Three categories of this are customer intimacy, operational excellence and product leadership  Customer intimacy we understand and respond to your individual needs better than our competitors  Operational excellence  we can deliver products and services faster, more conveniently and at a lower price than out competitors  Product leadership  we offer high quality products than our competitors Planning  Identify the alternatives and then select the one that best meets the orgs objective  Top mgmt. looks at the sales volumes, profit margins and cost of company’s established outlets in similar markets  Budget  a quantitative plan for the acquisition and use of financial and other resources over a specified future time period  Controller  the manager in charge of the actg department in an orgs Directing and Motivating  Managers make many small decisions that affect customers and employees  Managerial actg data such as daily sales reports are used in this type of decision making Controlling  Control  those steps taken by mgmt. that attempt to increase the likelihood that the objective developed at planning stage are attained and to ensure that all parts of the orgs function in a manner consistent with orgs policies  Feedback  actg and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed  Performance report  a detailed report comparing budgeted data to actual data  Providing feedback to managers is one of the central objectives of managerial actg. The results of managers’ activities  The role of mgerial actg is to inform and facilitate mgmt. decisions throughout these processes so that the mgers efforts result in the efficient achievement of company goals The Planning and control cycle  Planning and control cycle  the floe of mgmt. activities through planning, directing and motivating and controlling and then back to planning again  All of these revolve around decision making  Pg. 6 exhibit 1-1  The reports that managerial accountants provide answer the questions on pg. 6 The business plan  Consists of info about the company’s basic product or service and about the steps it will take to reach its potential market  Developing a typical business plan exhibit 1-2 on pg. 7 COMPARISON OF FINANCIAL AND MANAGERIAL ACTG  Financial actg reports are prepared for external parties such as shareholders and creditors whereas managerial actg reports are prepared for mgers inside the orgs  They both different in their emphasis on the past and the future Emphasis on the future  Managerial actg has a stron future orientation and financial actg summarizes past financial transactions  Exhibit 1-3 on pg. 8 Relevance of Data  Financial actg the data are expected to objective and verified but for managerial it’s not necessary because managers want info that’s relevant Less emphasis on precision  Managerial accountant often place less emphasis on precision because managers would want an immediate estimate  Managerial actg laces more weight on non-monetary data Segments of an orgs  Segment  an part of an orgs that can be evaluated independently of other parts and about which the managers seek financial data  Financial actg reports for the company as a whole Generally Accepted Actg Principles  Managerial actg is not bound by actg standards  The only constraint managerial accountants have is that the benefit from using the info should outweigh the costs of collecting, analyzing and summarizing it
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