Management Accounting Financial Accounting
Internal users (officers, managers, External users (shareholders,
…) creditors, regulators, …)
Internal rapports (as frequently as Financial statements
needed) (quarterly/annually)
Special purpose for specific General purposes
decisions
Very detailed Highly aggregated
No independent audits Audits by accountants
Managerial accounting = provides economic and financial information for
managers and other internal users
2. Functions of management
- Planning: look ahead and establish objectives
- Directing: coordinating a company’s diverse activities and HR to
produce a smooth-running operation
- Controlling: keeping the company’s activities on track
3. Classes of manufacturing costs
Manufacturing = activities and processes that convert raw materials into
finished goods
- Product costs
Direct materials (DM) = raw materials that can directly be
associated with the product
Direct labor (DL) = work of factory employees that can directly
be associated with the product
Manufacturing overhead (MO) = costs that are indirectly
associated with the manufacture of the finished product
2 characteristics:
1. Don’t physically become part of the finished product
2. Impractical to link to the finished product
1
, - Period costs
Costs that are matched with the revenue of a specific period
rather than included as part of the cost of a produced product
Example: selling expenses, administrative expense
4. Compute the cost of goods manufactured
Work in progress (1 January)
+ Direct materials = Raw materials (1 January)
+ Direct labor + raw materials purchases
+ manufacturing overhead - raw materials (31
December)
- work in progress (31 December)
5. Trends in managerial accounting
- Service industries
Global economy shifts from manufacturing to service companies
Services are consumed immediately (airlines, meal at a
restaurant)
- Focus on the value chain
Lean manufacturing: increase productivity and eliminate waste
Just-In-Time (JIT): decrease inventory by getting raw materials
delivered when they’re needed
Total Quality Management (TQM): continue the process of
searching for and decreasing errors
Theory of constraints: eliminating the biggest problem which
stands in the way of achieving the goals
ERP: a course in semester 2
Activity-based costing: a method for assigning overhead &
indirect costs to products and services
- Balanced scorecard
Way to prevent a limited perspective of the manager
- Business ethics
Social responsibility gets even more important every day
2
, 6. Exercises
E1.3
E1.4
3
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