Chapter 1 4 Management Accounting
Chapter 1 Managerial Accounting, the Business Organization, and Professional Ethics
Management accounting produces information for managers within an organization.
Financial accounting produces information for external parties, such as stockholders, suppliers, banks, and government regulatory agencies.
What kind of accounting information do managers need to achieve their goals and objectives? Good accounting information helps answer three types of questions:
1. Scorecard questions
2. Attention-directing questions
3. Problem-solving questions
Managers should keep two important ideas in mind when designing accounting systems:
1. Cost-benefit balances – weighing estimated costs against probable benefits – are the primary consideration in choosing among accounting systems and methods.
2. Behavioral implications are the system’s effect on the behavior, specifically the decisions, of managers.
A budget is a quantitative expression of a plan of action. Budgets also help to coordinate and implement plans.
Performance reports provide feedback by comparing results with plans and by highlighting variances. Organizations use performance reports to judge mangers’ decisions and the productivity of organizational units. Performance reports compare the actual results to budgets, thereby motivating managers to achieve the objectives.
Management by exception means concentrating on the area’s that deviate from the plan and, in the absence of other evidence, presuming that areas that conform with plans are running smoothly.
The activities that are necessary for a company to create the goods or service that it sells belong to the value chain, the set of business functions or activities that add value to the products or services of an organization. These functions include the following:
Research and development
Design
Production
Marketing
Distribution
Costumer service
Line managers are directly involved with making and selling the organization’s products or services. In contrast,
Management accounting produces information for managers within an organization.
Financial accounting produces information for external parties, such as stockholders, suppliers, banks, and government regulatory agencies.
What kind of accounting information do managers need to achieve their goals and objectives? Good accounting information helps answer three types of questions:
1. Scorecard questions
2. Attention-directing questions
3. Problem-solving questions
Managers should keep two important ideas in mind when designing accounting systems:
1. Cost-benefit balances – weighing estimated costs against probable benefits – are the primary consideration in choosing among accounting systems and methods.
2. Behavioral implications are the system’s effect on the behavior, specifically the decisions, of managers.
A budget is a quantitative expression of a plan of action. Budgets also help to coordinate and implement plans.
Performance reports provide feedback by comparing results with plans and by highlighting variances. Organizations use performance reports to judge mangers’ decisions and the productivity of organizational units. Performance reports compare the actual results to budgets, thereby motivating managers to achieve the objectives.
Management by exception means concentrating on the area’s that deviate from the plan and, in the absence of other evidence, presuming that areas that conform with plans are running smoothly.
The activities that are necessary for a company to create the goods or service that it sells belong to the value chain, the set of business functions or activities that add value to the products or services of an organization. These functions include the following:
Research and development
Design
Production
Marketing
Distribution
Costumer service
Line managers are directly involved with making and selling the organization’s products or services. In contrast,