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Summary Chapter 1 - Management and Cost Accounting 10th edition - Colin Drury - Cengage R59,15   Add to cart

Summary

Summary Chapter 1 - Management and Cost Accounting 10th edition - Colin Drury - Cengage

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Summary chapter 1 management and cost accounting drury 10th edition

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  • Chapter 1
  • September 19, 2019
  • 3
  • 2019/2020
  • Summary
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1. Introduction to management
accounting
- Accounting: process of identifying, measuring and communicating economic information to
permit informed judgements and decisions by users of the information

The users of accounting information:
- Managers: need information to assist decision-making and controlling
- Shareholders: need information on the value of their investment and their income
- Employees: need information on the ability of the firm to pay their wages
- Creditors/capital loaners: need information on firm’s ability to meet financial obligations
- Government agencies: collect accounting information like taxes and sales, use it to
determine policies to manage the economy
 All the above mentioned parties are STAKEHOLDERS

The users of accounting information can be divided into two categories:
- Internal users within the organization  management accounting
- External users outside the organization  financial accounting

Differences between management accounting and
financial accounting
- Legal requirement: financial reports are statutory obligation, management reports not
- Focus on individual parts or segments of the business: financial covers entire organization
- Generally accepted accounting principles: used in financial, not in management.
- Time dimension: financial reports past, management looks at future
- Report frequency and less emphasis on precision: financial is annual and very precise,
management way more frequent and less precise

The decision-making, planning and control process




- Identifying objectives: firms seek to maximize profit
- Alternative courses of action: also known as strategies. Three main strategies:
o New product for existing market
o New product for new market
o New market of existing products

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