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Lecture notes management accounting and control
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Lecture notes of 60 pages for the course Management Accounting And Control at UVT
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Management Accounting and ControlEC1 – The Kick-Off
Human Brain MRS (Management Reporting system)
- Remembering things Decision-facilitating function
- Instructing body parts Decision-influencing function
- Coordinating between body parts coordination-facilitating function
A managerial reporting system in a firm is as our human brain in our body.
Overall goals of this course
Develop a sophisticated understanding of the powerful role of MRS to achieve
organizational objectives in a timely, efficient and effective manner.
How could MRS help to make sure employees execute/implement the intended strategy?
Remembering. Giving them the ‘best possible information. Decision-facilitating role
of MRS.
Instructing. Aligning individual behavior with organizational objectives. Decision-
Influencing role of MRS.
Coordinating. Facilitating cooperation between entities. Coordination-facilitating
role of MRS.
How does this course relate to ‘practice’?
,Rolling forecast = every month they make a forecast for the next 3 months.
Are management reporting systems important?
Human brain Management Reporting System
Remembering, instructing, coordinating Decision-facilitating, decision-influencing,
coordination-facilitating
Not visible from the outside Not visible for outsiders
Motivation to train the human brain is Willingness to invest in properly functioning
rather low MRS is rather low
Malfunctions in the human brain strongly Weak MRS limit value creation
decrease quality of life
Other body parts do not function properly Other functions in the firm do not function
without the human brain properly without MRS
Surgery on the human brain is difficult and Improving MRS is difficult and delicate
delicate
What is the problem? Macro-level
Example
External risk that influences the expected outcomes TUI: corona
Internal risk that influences the expected outcomes of TUI:
,Example:
Internal risk: employee related risks. The employees by your own firm. Lazy employees can
affect the expected outcomes.
Homework: think about an organization you know and complete this macro-level diagram.
See the example of FuturumShop BV how it works.
What is the problem? Micro-level
Let’s think about an entrepreneur without employees…
The entrepreneur does not have internal employee-related risks, implying that
his/her MCS should not be designed to mitigate these risks.
The business grows, employees are hired and paid a fixed wage…
To which internal employee-related risks (or control problems) is the entrepreneur which
employees subject to?
- Lack of effort
- The skills of the employee are not sufficient for the task.
- The employee is not working in the direction the firm wants to go.
, What is the problem? Micro-level
What is the problem? Analytical
1. Effort of the agent (represented by ‘a’) is unobservable because
o Continuous monitoring of the agent is too costly
o The principal has not enough knowledge to judge the agent’s effort
2. Risk averse agents combined with a noisy signal x of the agent’s effort
3. The signal x can be manipulated by the agent
A managerial reporting system provides information about the signals x that carry
information about the ability and effort of managers and employees and the signals also
provide information about the direction in which the firm wants to go!
In general, a managerial reporting system provides information about anything that happens
inside the firm!
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