Managerial Accounting 2

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The Manager and Management Accounting
BUSI 0028 
Sem 2, 2012/13
Dr. Olivia Leung

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Accounting Discipline Overview
 Managerial accounting—measures, analyzes, and 

reports financial and nonfinancial information to help  managers make decisions to fulfill organizational 
goals. Managerial accounting need not be GAAP 
compliant.
 Financial accounting—focus on reporting to external 

users including investors, creditors, and governmental  agencies. Financial statements must be based on 
GAAP.
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2

Major Differences Between 
Financial and Managerial Accounting
Managerial Accounting

Financial Accounting

Purpose

Decision making

Communicate financial 
position to outsiders

Primary Users

Internal managers

External users

Future‐oriented

Past‐oriented

Do not have to follow GAAP; 
cost vs. benefit

GAAP compliant; 
CPA audited

Time Span

Ultra current to very long
time horizons

Historical monthly, 
quarterly reports

Behavioral 
Issues

Designed to influence 
employee behavior

Indirect effects on 
employee behavior

Focus/Emphasis
Rules

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3

Strategy and Management Accounting
 Strategy—specifies how an organization matches its 

own capabilities with the opportunities in the 
marketplace to accomplish its objectives
 Strategic cost management—the approaches and 

activities of manages to use resources to increase value  to customers and to achieve organizational goals 
generated from the organization’s strategies.
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4

Strategy and Management Accounting
 Management accounting helps answer important 

questions such as:
 Who are our most important customers, and how do we 

deliver value to them?
 What substitute products exist in the marketplace, and  how do they differ from our own?
 What is our critical capability?
 Will we have enough cash to support our strategy or will  we need to seek additional sources?
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5

Management Accounting and Value
 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.

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6

Management Accounting and Value
 Value chain is the sequence of business functions 

in which customer usefulness is added to products 
or services.
 The Value chain consists of:
Research & development
2. Design
3. Production
4. Marketing
5. Distribution
6. Customer service
1.

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7

The Value Chain Illustrated

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8

A Value Chain Implementation

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9

Key Success Factors
 The dimensions of performance that customers 

expect, and that are key to the success of a company  include:
 Cost and efficiency
 Quality
 Time
 Innovation

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10

Planning and Control Systems
 Planning selects goals, predicts results, decides how to 

attain goals, and communicates this to the 
organization.
 Budget—the most important planning tool

 Control takes actions that implement the planning 

decision, decides how to evaluate performance, and 
provides feedback to the organization.

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11

A Five‐Step Decision Making Process in 
Planning and Control
1.
2.
3.
4.
5.

Identify the problem and uncertainties.
Obtain information.
Make predictions about the future.
Make decisions by choosing between alternatives.
Implement the decision, evaluate performance, and 
learn.

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