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The Manager and Management Accounting Copyright © 2015 Pearson Education

The Manager and Management Accounting

Copyright © 2015 Pearson Education

1. Distinguish financial accounting from management accounting 2. Understand how management accountants help firms make strategic
  • 1. Distinguish financial accounting from management accounting

  • 2. Understand how management accountants help firms make strategic decisions

  • 3. Describe the set of business functions in the value chain and identify the dimensions of performance that customers are

expecting of companies

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4. Explain the five-step decision-making process and its role in management accounting 5. Describe three guidelines
4. Explain the five-step decision-making process and its role in management accounting 5. Describe three guidelines
4. Explain the five-step decision-making process and its role in management accounting 5. Describe three guidelines
  • 4. Explain the five-step decision-making process and its role in management accounting

  • 5. Describe three guidelines management accountants follow in supporting managers

  • 6. Understand how management accounting

fits into an organization’s structure

  • 7. Understand what professional ethics mean to management accountants

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 Management accounting — measures, analyzes, and reports financial and nonfinancial information to help managers make
  • Management accountingmeasures, analyzes, and reports financial and nonfinancial information to help managers

make decisions to fulfill organizational goals.

Management accounting need not be GAAP compliant.

  • Financial accountingfocuses on reporting to external users including investors, creditors, banks, suppliers, and governmental agencies. Financial statements must be based on GAAP.

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 Cost accounting – measures, analyzes and reports financial and nonfinancial information related to the costs
 Cost accounting – measures, analyzes and reports financial and nonfinancial information related to the costs
  • Cost accounting measures, analyzes and reports financial and nonfinancial information related to the costs of acquiring or using resources in an organization.

  • Today, most accounting professionals take the position that cost information is part of

management accounting; therefore, the

distinction between the two is not clear-cut and in this book, we often use the terms interchangeably.

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Copyright © 2015 Pearson Education
Copyright © 2015 Pearson Education
Copyright © 2015 Pearson Education

Copyright © 2015 Pearson Education

 Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace.
 Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace.
  • Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace.

There are two broad strategies: cost

leadership or product differentiation

  • Strategic cost managementdescribes cost management that specifically focuses on strategic issues.

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Management accounting helps answer important questions such as:  Who are our most important customers, and
Management accounting helps answer important questions such as:  Who are our most important customers, and

Management accounting helps answer important questions such as:

  • Who are our most important customers, and how can we be competitive and deliver value to them?

  • What substitute products exist in the marketplace, and how do they differ from our own?

  • What is our most critical capability?

  • Will adequate cash be available to fund the strategy or will additional funds need to be raised?

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 Creating value is an important part of planning and implementing strategy.  Value is the
 Creating value is an important part of planning and implementing strategy.  Value is the
  • Creating value is an important part of planning and implementing strategy.

  • Value is the usefulness a customer gains from a company’s product or service. The entire customer experience determines the value a customer derives from a product.

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 The Value chain is the sequence of business functions in which a product is made
 The Value chain is the sequence of business functions in which a product is made
  • The Value chain is the sequence of business functions in which a product is made progressively more useful to customers.

  • The Value chain consists of:

    • 1. Research & development

    • 2. Design of Products and Processes

    • 3. Production

    • 4. Marketing

    • 5. Distribution

    • 6. Customer service

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Copyright © 2015 Pearson Education
Copyright © 2015 Pearson Education

Copyright © 2015 Pearson Education

Copyright © 2015 Pearson Education
Copyright © 2015 Pearson Education

Copyright © 2015 Pearson Education

 Production and Distribution are the parts of the value chain associated with producing and delivering
 Production and Distribution are the parts of the value chain associated with producing and delivering
  • Production and Distribution are the parts of the value chain associated with producing and delivering a product or service.

  • These two functions together are known as the Supply-Chain

  • The supply chain describes the flow of goods, services and information from the initial sources of materials, services, and information to their delivery regardless of whether the activities occur in one organization or in multiple organizations.

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 Customers want companies to use the value chain and supply chain to deliver ever- improving

Customers want companies to use the value chain and supply chain to deliver ever- improving levels of performance when it

comes to several (or even all) of the

following:

  • Cost and efficiency

  • Quality

  • Time

  • Innovation

  • Sustainability

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1. Identify the problem and uncertainties. 2. Obtain information. 3. Make predictions about the future. 4.
1. Identify the problem and uncertainties. 2. Obtain information. 3. Make predictions about the future. 4.
  • 1. Identify the problem and uncertainties.

  • 2. Obtain information.

  • 3. Make predictions about the future.

  • 4. Make decisions by choosing between alternatives.

  • 5. Implement the decision, evaluate performance, and learn.

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.

 Planning selects goals and strategies, predicts results, decides how to attain goals, and communicates this
  • Planning selects goals and strategies, predicts results, decides how to attain goals, and communicates this to the organization.

    • Budgetthe most important planning tool-is the quantitative expression of a plan of activity by management and is an aid to coordinating what needs to be done to execute that plan.

  • Control takes actions that implement the planning decision, evaluates performance, and provides feedback and learning to the organization.

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.

Three guidelines help management accountants provide the most value to the strategic and operational decision- making
Three guidelines help management accountants provide the most value to the strategic and operational decision- making

Three guidelines help management accountants provide the most value to the strategic and operational

decision- making of their companies:

  • Costbenefit approach: benefits of an action/purchase generally must exceed costs as a basic decision rule.

  • Behavioral and technical considerations: people are involved in decisions, not just dollars and cents.

  • Different Costs for Different Purposes: Managers use alternative ways to compute costs in different decision-making situations.

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Copyright © 2015 Pearson Education .
Copyright © 2015 Pearson Education .
Copyright © 2015 Pearson Education .

Copyright © 2015 Pearson Education

.

 The four standards of ethical conduct for management accountants as advanced by the Institute of
  • The four standards of ethical conduct for management accountants as advanced by the Institute of Management Accountants are:

    • Competence

    • Confidentiality

    • Integrity

    • Objectivity

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The Sarbanes-Oxley legislation was passed in 2002 in response to a series of corporate scandals. The
The Sarbanes-Oxley legislation was passed in 2002 in response to a series of corporate scandals. The
The Sarbanes-Oxley legislation was passed in 2002 in response to a series of corporate scandals. The

The Sarbanes-Oxley legislation was passed in 2002 in response to a series of corporate scandals. The act focuses on improving:

  • 1. Internal controls

  • 2. Corporate governance

  • 3. Monitoring of managers

  • 4. Disclosure practices of public companies

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TERMS to LEARN Page Number Reference Budget Page 11 Chief Financial Officer Page 14 Control Page

TERMS to LEARN

Page Number Reference

Budget

Page 11

Chief Financial Officer

Page 14

Control

Page 11

Controller

Page 14

Cost Accounting

Page 4

Cost-Benefit approach

Page 12

Cost Management

Page 4

Customer Relationship

Page 7

Management (CRM)

Customer Service

Page 6

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TERMS to LEARN Page Number Reference Design of products and processes Page 6 Distribution Page 6

TERMS to LEARN

Page Number Reference

Design of products and processes

Page 6

Distribution

Page 6

Finance Director

Page 14

Financial Accounting

Page 3

Learning

Page 12

Line Management

Page 14

Management Accounting

Page 4

Marketing

Page 6

Planning

Page 11

Production

Page 6

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TERMS to LEARN Page Number Reference Research & Development (R&D) Page 6 Staff Management Page 14

TERMS to LEARN

Page Number Reference

Research & Development (R&D)

Page 6

Staff Management

Page 14

Strategic Cost Management

Page 5

Strategy

Page 5

Supply Chain

Page 7

Sustainability

Page 8

Total Quality Management (TQM)

Page 8

Value Chain

Page 8

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Copyright © 2015 Pearson Education .

Copyright © 2015 Pearson Education

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