CHAPTER 1: Managerial Accounting
1. Identify the features of managerial accounting and the functions of
management
Managerial accounting
= provides economic and financial information for managers and other internal users
= provides tools to assist management in making decisions and to evaluate the effectiveness of those
decisions
Questions such as:
o Are we making profit?
o How will the number of kayaks produced impact production cost and hence
profitability?
o Do we need to accept a special order?
What does a company need:
o Product / service
o Marketing
o Accounting
Comparing Managerial and Financial Accounting (EXAMEN!)
Management accounting Financial accounting
• Internal users • Analysis (vergelijken!!)
• Detailed • External users
• No written rules (no regulations) • General
• BESLISSEN! • Strict regulations
(GAAP = boekhoudwet)
1
,Management Functions
• Planning
o Look ahead and establish objectives
o Maximize short-term profit and market share
o Commit to environmental protection and social programs
o Key objective = add value to the business
• Directing
o Coordinate diverse activities and human resources
o Implement planned objectives
o Provide necessary incentives to motivate employees
o Hire and train employees
o Produce a smooth running operation
• Controlling
o Keeping the company’s activities on track
o Determine whether planned goals are met
o Decide changes needed to get back on track
o May use an informal or formal system of evaluations
Organizational Structure
➔ Organization charts
= show the interrelationships of activities and the delegation of authority and responsibility
within the company
2
,Controller vs Treasurer
• Controller
o Maintaining accounting records
o Ensuring an adequate system of internal control
o Preparing financial statement, tax returns and internal reports
o (maakt analyses)
• Treasurer
o Custody of the company’s funds
o Responsible for maintaining the company’s cash position
o Insurances
o (bezig houden met het geld van de vennootschap, beslissing ivm verzekeringen en
bankrelatie)
EXERCISE:
TRUE OR FALSE?
1. Managerial accountants have a single role within an organization, collecting and reporting
costs to management
2. Financial accounting reports are general-purpose and intended for external users
3. Managerial accounting reports are special-purpose and issued as frequently as needed
4. Managers’ activities and responsibilities can be classified into 3 broad functions: cost
accounting, budgeting, and internal control
5. Managerial accounting reports must now comply with generally accepted accounting
principles (GAAP)
Solutions:
1. FALSE: managerial accountants determine product costs. In addition, managerial accountants
are now held responsible for evaluating how well the company employs its resources. As a
result, when the company makes critical strategic decisions, managerial accountants serve as
team members alongside personnel from production, marketing, and engineering
(ook analyseren en zelf beslissingen nemen)
2. TRUE
3. TRUE
4. FALSE: Managers’ activities are classified into 3 broad functions: planning, directing and
controlling. Planning requires managers to look ahead to establish objectives. Directing
involves coordinating a company’s diverse activities and human resources to produce a
smooth-running operation. Controlling keeps the company’s activities on track.
5. FALSE: managerial accounting reports are for internal use and thus do not have to comply
with accounting standards
3
, 2. Describe the classes of manufacturing costs and the differences between
product and period costs
➔ Managers should ask questions such as the following (kostenstructuur)
o What costs are involved in making a product or providing a service?
o If we decrease production volume, will costs decrease?
o What impact will automation have on total costs?
o How can we best control costs?
4
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