Introduction to Managerial Accounting
PURPOSE:
It’s all about using information to plan,
control and make decisions.
Accountants
produce information and managers use information.
Learning Objectives:
1.State the primary
goal of managerial accounting.
2.Describe how
budgets are used in planning
3.Describe how
performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms
used in planning, control and decision making.
6.Explain the two
key ideas in managerial accounting.
7.Discuss the
duties of the controller, the treasurer and the chief financial officer (CFO).
Primary Goal of Managerial Accounting
Effective managers must be adept at planning,
controlling and decision making.
Related Learning Objectives:
1.State the primary goal of managerial
accounting.
2.Describe
how budgets are used in planning
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Planning
Planning has to do with budgeting in a
managerial context. It is in this way that a company’s goals are communicated
to all employees.
Budgets include profit budgets, cash-flow
budgets, production budgets and many others.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Controlling
The notion of managerial control has to
do with measuring and evaluating the performance of both the manager and the
operation(s) for which the manager is responsible.
There is an important distinction to be
made here. A manager is evaluated, at least in part, based on her overall
performance. Each operation for which she is responsible is evaluated in order
to optimize future goals and objectives.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe how performance reports are used in
the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Decision Making
An integral part of the planning and
controlling process, decision making includes both rewarding or punishing
managers for their performance AND dropping, adding or otherwise changing some
aspect of operations going forward.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe how budgets are used in planning.
3.Describe how performance reports are used in
the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
A Comparison of Managerial and Financial Accounting
Managerial accounting:
1.Is
meant primarily for internal users while financial
accounting is meant for external users.
2.Is
not driven by GAAP.
3.May
be much more detailed than financial (external) accounting reports.
4.May
include much nonfinancial data.
5.Is
forward looking rather than retrospective.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish between financial and managerial
accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Similarities Between Financial and Managerial Accounting
Although managerial accounting is meant for
internal users (management) and financial
accounting is meant for external
users, managers DO make use of financial accounting information.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish between financial and managerial
accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Cost Terms
The term “cost” appears in many contexts and
carries a number of meanings.
Different categories of cost terms are merely
different ways to look at costs or to slice and dice cost information. They are
not necessarily complementary to or mutually exclusive of other cost
categories.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms used in planning, control
and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Variable and Fixed Costs
Variable costs: costs that increase or
decrease (in total) relative to increases or decreases in the level of business
activity.
Fixed costs: costs that do not change
(in total) relative to changes in business activity.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms used in planning, control
and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Sunk Costs
Sometimes called “past costs.” These costs are
NOT relevant to the decision making process.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms used in planning, control
and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Opportunity Costs
These are the values of potential benefits
foregone when a decision is made.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms used in planning, control
and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Direct and Indirect Costs
Direct costs: costs that are directly
traceable to some object such as a product, activity or department.
Indirect costs: costs that are NOT directly
traceable to a product, activity or department.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms used in planning, control
and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Controllable and Noncontrollable Costs
Yet another way to slice and dice costs. This
time it has to do with the degree of influence a manager has over the cost. If
a management decision can impact the cost in the short term, it is considered
controllable. Conversely, if a manager cannot influence (control) the cost in
the short term, then it is noncontrollable. A manager’s performance should NOT
include an assessment of noncontrollable costs.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define cost terms used in planning, control
and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Two Key Ideas in Managerial Accounting
They are:
1.Decision
making relies on incremental analysis—an analysis of revenues and costs that increase or decrease if a particular decision alternative is selected.
2.You
get what you measure!
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain the two key ideas in managerial
accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
Decision Making Relies on Incremental Analysis
Incremental means “difference.” Here decision
making looks at the difference between revenues and expenses if selection (a)
is made as opposed to selection (b).
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain the two key ideas in managerial
accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
You Get What You Measure
Performance measurement impacts management
behavior.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain the two key ideas in managerial
accounting.
7.Discuss
the duties of the controller, the treasurer and the chief financial officer
(CFO).
The Controller As the Top Management Accountant
Controller: The top management
accountant responsible for preparing information for planning, controlling and
decision making.
Treasurer: The treasury function is custodial in nature;
custody of assets.
Chief Financial Officer (CFO): The
senior executive to whom both the controller and CFO report.
Related Learning Objectives:
1.State
the primary goal of managerial accounting.
2.Describe
how budgets are used in planning.
3.Describe
how performance reports are used in the control process.
4.Distinguish
between financial and managerial accounting.
5.Define
cost terms used in planning, control and decision making.
6.Explain
the two key ideas in managerial accounting.
7.Discuss the duties of the controller, the
treasurer and the chief financial officer (CFO).
Prepared by: Abdulkadir Ali Mount Kenya University
No comments:
Post a Comment