Upload
vishuvam
View
217
Download
0
Embed Size (px)
Citation preview
8/8/2019 Nature of Management Accounting New
1/25
Nature of ManagementAccounting
A managerial perspective
8/8/2019 Nature of Management Accounting New
2/25
Learning Objectives
Distinguish among the differentaccounting systems.
Identify four themes managers needto consider for attaining success.
Describe the set of business functionsin the value chain.
8/8/2019 Nature of Management Accounting New
3/25
Management Accounting Management accounting measures and reports financial and
non-financial information that helps managers make decisionsto fulfill the goals of an organization
Managers use management accounting information to
choose, communicate and implement strategy
coordinate product design, production and marketingdecisions
Management accounting focuses on
internal reporting
Management accounting is futureoriented
Pages 2-3
8/8/2019 Nature of Management Accounting New
4/25
Characteristics of Management
Accounting Providing Accounting Information
Cause & Effect Analysis.
Use of special techniques & concepts.
Taking Important decisions
Achieving of objectives.
No Fixed Norms followed.
Increase in efficiency
Supplies information and not decision.
Concerned with forecasting.
8/8/2019 Nature of Management Accounting New
5/25
Scorekeeping:Scorekeeping:
EvaluateEvaluate
OrganizationalOrganizationalPerformancePerformance
Attention Directing:Attention Directing:
Compare Actual ResultsCompare Actual Results
to Expectedto Expected
Problem Solving:Problem Solving:
Assess PossibleAssess PossibleCourses of ActionCourses of Action
Functions of Management AccountingFunctions of Management Accounting
8/8/2019 Nature of Management Accounting New
6/25
Scope of Management Accounting Financial Accounting
Cost Accounting
Financial Management
Budgeting & forecasting
Inventory control
Reporting to management.
Interpretation of data.
Control procedures & methods.
Internal Audit Tax Accounting
Office services.
8/8/2019 Nature of Management Accounting New
7/25
Financial Accounting Financial accounting measures and records
business transactions and provides financialstatements that are based on generally accepted
accounting principles (GAAP) Managers are responsible for the financial
statements issued to investors, governmentregulators, and other parties outside the
organization Financial accounting focuses on external parties
Financial accounting reports on what happened inthe past
Pages 2-3
8/8/2019 Nature of Management Accounting New
8/25
Cost Accounting and Cost
Management Cost accounting measures and reports information relating
to the cost of acquiring and utilizing resources
Cost accounting provides information for management andfinancial accounting
Cost management describes the approaches and activities ofmanagers in short-run and long-run planning and controldecisions
These decisions increase value of customers and lower costs
of products and services Cost management is an integral part of a companys
strategy
Pages 3-4
8/8/2019 Nature of Management Accounting New
9/25
Users of AccountingUsers of AccountingInformationInformation
Internal managersInternal managers
Creditors:Creditors:
SuppliersSuppliers
BankersBankers
DayDay--toto--day operating decisionsday operating decisions
LongLong--range strategic decisionsrange strategic decisions
Management AccountingManagement Accounting Financial AccountingFinancial Accounting
External UsersExternal Users
Investors: StockholdersInvestors: Stockholders
Government AuthoritiesGovernment Authorities
8/8/2019 Nature of Management Accounting New
10/25
Management Accounting & Financial
Accounting A close relationship but certain distinctions:
Object
Nature
Subject-matter
Compulsion
Precision
Reporting
Description
Quickness Accounting Principles
Period
Publication & Audit
8/8/2019 Nature of Management Accounting New
11/25
Management Accounting &Cost Accounting
Some overlapping between costaccounting and managementaccounting:
Object
Scope
Nature
Data used
Development
Principle followed
8/8/2019 Nature of Management Accounting New
12/25
CostCost--Benefit and Behavioral ConsiderationsBenefit and Behavioral Considerations
CostCost--benefitbenefit
balancebalance
BehavioralBehavioral
implicationsimplications
Weigh estimatedWeigh estimatedcosts againstcosts against
probable benefits.probable benefits.
The system must provideThe system must provideaccurate, timely budgets andaccurate, timely budgets and
performance reports in a formperformance reports in a form
useful to managers.useful to managers.
Managers must use accountingManagers must use accounting
reports, or the reportsreports, or the reports
create no benefits.create no benefits.
8/8/2019 Nature of Management Accounting New
13/25
Decision MakingDecision Making
Decision making: the purposeful choiceDecision making: the purposeful choice
from among a set of alternative coursesfrom among a set of alternative courses
of action designed to achieve some objective.of action designed to achieve some objective.
Planning: Setting objectivesPlanning: Setting objectives
and outlining how theand outlining how the
objectives will be obtained.objectives will be obtained.
Control: ImplementingControl: Implementing
plans and using feedbackplans and using feedbackto evaluate the attainmentto evaluate the attainment
of objectives.of objectives.
8/8/2019 Nature of Management Accounting New
14/25
8/8/2019 Nature of Management Accounting New
15/25
8/8/2019 Nature of Management Accounting New
16/25
Key Management Accounting Guidelines
Cost-Benefit Approach
spend resources if they promote decision making thatbetter attains the organizations goals in relation to the costof these resources
Behavioural and Technical Considerations systems are not confined exclusively to technical matters
always consider the influences of human activity
Different Costs for Different Purposes
definecost depending on the situation underconsideration
8/8/2019 Nature of Management Accounting New
17/25
Performance ReportsPerformance Reports
Actual Actual BudgetedBudgeted Difference Difference (%)Difference Difference (%)
Advertising Pages sold 760 pg 800 pg 40pg( UF) 5% UF Advertising Pages sold 760 pg 800 pg 40pg( UF) 5% UF
Average Rate /Page Average Rate /Page 5080 5200 120 (UF) 2.3%UF5080 5200 120 (UF) 2.3%UF
Advertising revenue 3860800 4160000 299200(UF) Advertising revenue 3860800 4160000 299200(UF)7.2%UF7.2%UF
Performance Report on Advertising RevenuePerformance Report on Advertising Revenue
8/8/2019 Nature of Management Accounting New
18/25
Product Life CycleProduct Life Cycle
Product life cycle refers to the variousProduct life cycle refers to the various
stages through which a product passes.stages through which a product passes.
No SalesNo Sales
ProductProduct
DevelopmentDevelopment
Sales GrowthSales Growth
Introduction to MarketIntroduction to Market
Stable Sales LevelStable Sales Level
Mature MarketMature Market
Low salesLow salespp No salesNo sales
PhasePhase--outout
ProductProduct
8/8/2019 Nature of Management Accounting New
19/25
Four Themes of Value Enhancement
3. Key success factors (KSFs)
keep attention focused on critical factors relative to ourcompetitors
4. Continuous improvement and benchmarking never-ending search for higher levels of performance
Page 12 - 15
2. Value-chain and supply-chain analysis manage these critical functions
1. Customer Focus attract and retain profitable customers
8/8/2019 Nature of Management Accounting New
20/25
The Value ChainThe Value Chain
CustomerCustomer
FocusFocus
ResearchResearch
andand
DevelopmentDevelopment
ProductProduct
AndAnd
ServiceService
ProcessProcess
DesignDesign
ProductionProduction
MarketingMarketing
DistributionDistribution
ServiceService
8/8/2019 Nature of Management Accounting New
21/25
The Value Chain
Sequence of business functions in which utility(usefulness) is added to the products or servicesof an organization
Management accounting helps managers toadminister each of these business functions
Research
and
Development
Product,
Service
Process
Design
Production Marketing DistributionCustomer
Service
Management Accounting
Page 14
8/8/2019 Nature of Management Accounting New
22/25
E-Business Value Matrix
BusinessCriticality
(Importance of the
applicationto the
success of
thebusiness)
Page 16
High
Low
Operational
Excellence
Rational
Experimentation
New
Fundamentals
Breakthrough
Strategies
Low High
Practice Innovation
(Creating new markets ornew ways of doing
business)
8/8/2019 Nature of Management Accounting New
23/25
Starbucks coffee company Is theleading roaster and retailer of
specialty coffee in North America withannual sales revenue of more than1.5 billion .For each of the followingactivities, indicate the value chain
function that is being performed
8/8/2019 Nature of Management Accounting New
24/25
CONTD.
Process engineers investigate methods toreduce the time to roast coffee beans andto better preserve their flavor.
A direct to your home mail order system isestablished to sell custom coffees.
Arabica coffee beans are purchased andtransported to company processing plants.
Focus groups investigate the feasibility of anew line of Frappuccino drinks.
8/8/2019 Nature of Management Accounting New
25/25
A hot line is established for mail-order customers to call with
comments on the equity and speed ofdelivery.
Each company owned retail storeprovides information to customers
about the processes used to make itscoffee products.