Chapter 1 Notes
Chapter 1 Notes MGMT 201
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This 3 page Class Notes was uploaded by boilermaker2016 on Wednesday March 2, 2016. The Class Notes belongs to MGMT 201 at Purdue University taught by David Scott in Spring 2016. Since its upload, it has received 10 views. For similar materials see Managerial accounting in Business, management at Purdue University.
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Date Created: 03/02/16
Chapter 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment What is Managerial Accounting ??? Ø Managerial Accounting is the process of; o Identifying o Measuring o Analyzing o Interpreting o Communicating INFORMATION! • Is Managerial Accounting Just for Accountants??? • Of course not ! • Notice the word MANAGER in managerial – ALL managers use the tools of managerial accounting. • Love this class because even if you’re not going to be an accountant, you are going to be a MANAGER someday – right ? o You already are – You are the manager of your life every day ! • Managerial Accounting is an integral part of the management process and managerial accountants are important strategic partners in an organization’s management team. What do Managers Do Everyday? • The day-to-day work of a manager centers around 4 basic activities Ø Planning Ø Directing Ø Controlling Ø Decision Making Planning • Involves: Ø Setting goals and objectives for the company Ø Determining how to achieve them • For example, all companies want to generate more sales. One strategy to achieve this goal is to open more stores, so management may plan to build and begin operating 25 new stores next year. o Managerial accounting translates these plans into budgets—the quantitative expression of a plan. Management analyzes the budgets before proceeding to determine whether its expansion plans make financial sense. Directing Ø Means overseeing the company’s day-to-day operations • Management uses product cost reports, product sales information, and other managerial accounting reports to run daily business operations o Companies use product sales data to determine which items are generating the most sales and then uses that information to adjust product lines, production and marketing strategies Controlling Ø Means evaluating the results of the business operations against the business plan and making adjustments to keep the company pressing towards its goals • Companies use performance reports to compare each segment’s actual performance against the budget and then uses that feedback to take corrective actions if needed • If actual costs are higher than planned, or actual sales are lower than planned, then management may revise its plans or adjust operations o Perhaps newly opened stores are not generating as much income as budgeted. As a result, management may decide to increase local advertising to increase sales. Decision Making • Management is continually making decisions while it plans, directs, and controls operations o Price setting o Product offerings o Renovation of facilities • Does Managerial Accounting Add Value to a Company? • Of course it does! Ø Provides info for decision making and planning Ø Assists managers in directing and controlling activities Ø Motivates managers in directing and controlling activities Ø Measures performance of subunits, activities managers, and other employees Ø Assesses the organization’s competitive position Senior Managerial Accountants Within the Organization CFO and/or Controller • The chief managerial and financial accountant responsible for: o Supervising accounting personnel o Preparation of information and reports, managerial and financial o Analysis of accounting information o Planning and decision making Treasurer • Responsible for raising capital and safeguarding the organization’s assets o Supervises relationships with financial institutions o Work with investors and potential investors o Manages investments o Establishes credit policies o Manages insurance coverage Internal Auditor • Responsible for reviewing accounting procedures, records, and reports in both the controller’s and the treasurer’s area of responsibility o Expresses an opinion to top management regarding the effectiveness of the organization’s accounting system Managerial Accounting vs. Cost Accounting • Managerial accounting is the broad task of preparing information for planning, directing, controlling, and decision making within the context of an organization's operations o The cost accounting system is used to accumulate cost information, and is one part of the overall accounting system • Cost information accumulated by the cost accounting system is used for both managerial accounting and financial accounting purposes • Management Accounting (MGMT 20100) An introduction to accounting for management planning and control, including cost accounting, budgeting, accounting control system, and use of accounting information in management decisions. • Advanced Management Accounting (MGMT 50500) This course deals with the use of cost information in achieving strategic objectives of firms. The objective of this course is to understand the role of cost analysis in the value creating process.
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