Acc 406 Study Notes

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Wednesday January 11th, 2012
Chapter 1
Introduction to Management Accounting
What is Managerial Accounting?
-managerial accounting is providing information for a company’s internal users -it is the firm’s internal accounting system
-it is designed to support the information that managers need -it is not bound by any formal criteria such as GAAP or IFRS (International Financial Reporting Standards) -managerial accounting has 3 basic objectives:

1. Provide information for planning the organizations actions 2. Provide information for controlling the organizations actions 3. Provide information for making effective decisions
Information Needs for Planning, Control, and Decision Making: -managerial accounting information is needed by a number of individuals, in particular managers and empowered workers need comprehensive, up to date information for the following activities:  Planning: requires setting objectives and identifying methods to achieve those objectives  EX: a firm may set the objectives of increasing its short term and long term profitability by improving the overall quality of its products  Controlling: monitoring a plans implementation and taking corrective actions, usually achieved by comparing actual performance with expected performance  EX: managers may decide to let the plan continue as is, take corrective action of some type to put the action back with the original plan  Decision Making: process of choosing alternatives

 Managers cannot successfully plan or control the organization actions without making decisions regarding competing alternatives Comparison of Managerial and Financial Accounting
-there are two kinds of accounting information systems:
 Financial Accounting
 Managerial Accounting
Managerial Accounting:
-internal focus such as managers, executives and workers
-there are no rules
-financial and non financial information
-deals with future; strongly emphasizes information about future events -it is broad
Financial Accounting:
-external focus such as investors, creditors, customers, suppliers and government -must follow GAAP rules
-objective financial information
-it deals with historical orientation; records and reports events that happened -not as broad as managerial accounting; self contained
Wednesday January 11th, 2012
Value Chain:
-refers to the set of business functions that add value to an organization’s products or services -for a company to succeed all stages of the value chain add value to the final product -value chain is a systematic approach to examine the development of a firm’s competitive advantage -when value is built into each stage of a product or service, this increases the total value delivered by the organization -value chain includes:

 Design
 Develop
 Produce
 Market
 Deliver
-management accountants play a key role in delivering all value chain functions; they provide estimated revenue and cost data for each stage of the products life The Role of the Managerial Accountant

-managerial accountants must support management in all phases of business decision making -as specialists in accounting, they must be intelligent, well prepared, up to date with new developments, and familiar with the customs and practices of all countries in which their firms operate Structure of the Company:

-role of managerial accountants in an organization is one of support -they assist individuals who are responsible for carrying out organizations basic objectives -structure of company includes:
 Line Position: position that have direct responsibility for the basic objectives of an organization  EX: vice presidents of manufacturing and marketing, factory managers and assemblers  Staff Position: position that are supportive in nature and have only indirect responsibility for an organizations basic objective  EX: vice presidents of finance and human resources, the cost accountant and the purchasing manager  Controller: the controller is often viewed as a...
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