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Samenvatting Accounting for Managers - MIM
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- Katholieke Universiteit Leuven (KU Leuven)
Samenvatting lessen accounting for managers master in het management KULeuven
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Summary accounting1. The manager and management accounting
1.1. Financial accounting vs. management accounting
• Accounting is the process to record, analyze, summarize, and interpret financial information
of a business organization.
• Users of financial information
o Internal users (focus of this course)
Managers and owners
• They use the financial information for decision making (managerial
accounting)
o External users
Creditors and lenders, customers, governmental units
• Management accounting:
o Measures, analyzes, and reports financial and nonfinancial information that helps
managers make decisions to fulfill organizational goals.
o Must not be GAAP compliant
GAAP = Generally Accepted Accounting Principles
o Managers use management accounting information to:
Develop, communicate and implement strategies
Coordinate product design, production, and marketing decisions and
evaluate a company’s performance
• Financial accounting:
o Focuses on reporting financial information to external parties such as investors,
governmental agencies, banks, and suppliers, based on GAAP.
• Cost Accounting:
o Measures, analyzes and reports financial and nonfinancial information related to the
costs of acquiring or using resources in an organization.
• Management accounting ≈ cost accounting
Management accounting Financial accounting
Purpose of information Help managers to make Communicate organisation’s
decisions to fulfil financial position to investors,
organisation’s goals banks, regulators and other
outside parties
Primary users Managers of the organization External users: Investors,
banks, regulators, suppliers
Focus on emphasis Future oriented Past-oriented
Rules of maeasurement and Not GAAP compliant but based GAAP compliant and must be
reporting on cost-benefit analysis certified by external,
independent auditor
Time span Varies from hourly to 20 years Annual and quarterly
Type of report Financial and nonfinancial Financial reports on the
reports on products, company as a whole
departments, …
1
,Behavioral implications Designed to influence behavior Reports economic events but
of managers and other also influences behavior of the
employees managers because their
compensation is often based
on the reported financial result
1.2. How management accountants help firms
• Strategic Decisions and the Management Accountant
o Strategy specifies how an organization matches its own capabilities with the
opportunities in the marketplace
o Strategy defines scope of an organization on the long term
o There are two broad strategies: cost leadership and product differentiation.
o Strategic cost management describes cost management that specifically focuses on
strategic issues.
Strategy
Product
Cost Leadership
Differentiation
o
Cost leadership = the firm's ability to create economies of scale though
extremely efficient operations that produce a large volume
• i.e. Walmart
Differentiation = the firm's ability to create a good that is difficult to
replicate, thereby fulfilling niche needs
• i.e. Apple
• Strategic decisions are made based on Porter’s 5 forces model
o Customers
o Suppliers
o Substitute products
o New entrants
o Competitors
1.3. Business functions in the value chain
• Research & development
o Generating and experimenting with ideas related to new products, services or
processes
• Design of Products and Processes
o Detailed planning, engineering and testing of products and processes
• Production
o Procuring, transporting and storing, coordinating and assembling resources to
produce a product or deliver a service
• Marketing
o Promoting and selling products or services
• Distribution
o Processing orders and shipping products or services to customers
• Customer service
o Providing after-sales service to customers
2
, 1.4. Dimensions customers expect of companies
• Customer relationship management (CRM)
o CRM is a strategy that integrates people and technology in all business functions to
deepen relationships with customers, partners and distributors.
o CRM initiatives use technology to coordinate all customer-facing activities and design
and production activities necessary to get products to customers.
o Flow from initial sources of materials, services and information to their delivery
o Supply chain can consist of operations in multiple companies
o i.e. supply chain coca cola bottling company:
• Success factors
o Customers want companies to use the value chain and supply chain to deliver ever-
improving levels of performance of:
Cost and efficiency
Quality
Time
Innovation
Sustainability
1.5. Five step decision making process
1. Identify the problem/uncertainties
2. Obtain information
3. Make predictions about the future
4. Make decisions by choosing among alternatives
5. Implement the decision, evaluate performance and learn.
1.6. Planning and control systems
Planning:
1. selecting an organization’s goals and strategies
2. Predicting results under various alternative ways of achieving those goals
3. Deciding how to attain the desired goals, and
4. Communicating the goals and how to achieve them to the entire organization.
3
, • Management accountants serve as business partners in these planning activities because
they understand the key success factors and what creates value.
• The most important planning tool when implementing strategy is a budget.
o A budget is the quantitative expression of a proposed plan of action by management
and is an aid to coordinating what needs to be done to execute that plan.
Control:
1. Taking actions that implement the planning decisions
2. Evaluating past performance, and
3. Providing feedback and learning to help future decision making.
1.7. Three guidelines management accountants follow
• Three guidelines help management accountants provide the most value to the strategic and
operational decision making of companies:
1. The Cost-benefit approach compares the benefits of an action/purchase to the costs.
Generally, of course, the benefits should exceed the costs.
2. Behavioral and technical considerations recognize that management is primarily a human
activity that should focus on encouraging individuals to do their jobs better.
3. Managers use alternative ways to compare costs in different decision-making situations
because there are different costs for different purposes.
1.8. How management accounting fits into an organization’s structure
• Line management:
o Responsible for achieving the goals of the organization
o i.e. production, marketing, distribution managers
• Staff management:
o Provides advice, support and assistance to line management
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