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Summary management accounting ch1
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Summary management accounting ch1
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Management accounting:The branch of accounting that produces information for managers within an organization. It
is the process of identifying, measuring, accumulating, analysing, preparing, interpreting, and
communicating information that helps managers fulfil organizational objectives.
So: management accounting creates financial statements for internal decision makers, while financial
accounting does so primarily for external decision makers
Accounting system:
A formal mechanism for gathering, organizing, and communicating information about an
organization’s activities.
There are different kinds of accounting information for decision making and planning & control.
1. Scorekeeping:
a. We use scorekeeping for evaluating organizational performance
i. Is the company doing well or poorly?
2. Attention direction:
a. Comparing actual results to the expected results.
i. Which areas require additional investigation?
3. problem solving:
a. asses possible courses of action
i. of the alternatives considered, which is the best?
Planning:
Setting objectives for an organization and determining how to attain them.
Control:
Implementing plans and using feedback to evaluate the attainment of objectives.
Variances:
Deviations from the plan.
Performance reports spur (spoort aan) investigation of exceptions – items for which actual amount
differ significantly from budgeted amounts. Managers then revise operations to conform with the
plans or revise the plans. This process is called management by exception, which means
concentrating more on areas that deviate from the plan and less on areas that do conform with the
plan.
, Managers should keep two ideas in mind when designing accounting information systems:
1. the cost benefit balance:
a. weighing estimated cost against probable benefits, the primary consideration in
choosing among accounting systems and methods.
i. Price of new HR system vs. productivity gains
2. Behavioural implications:
a. The accounting system’s effect on the behaviour, specifically the decisions of
managers.
The product life cycle refers to the various stages through which a product passes, from conception
and development to introduction into the market, to maturation, and, finally, withdrawal from the
market.
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