management accounting introduction

1. Introduction – Management
Accounting
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 Questions to think about MA
 MA - Issues
 MA – objectives
 Mgt Process
 Differences btw Financial Accounting and MA
 Certifications
 Current focus in MA
 Value chain
 Role of MA
 Ethics in MA

2. QUESTIONS TO THINK
ABOUT
 Who uses management accounting
information?
 For what purposes is management accounting
information used
 Should management accounting information
provide both financial & nonfinancial
information?
 What organizations need a management
accounting information system?
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3. MA - issues
 Accounting information – identify problems
and solutions, evaluate effectiveness such
decisions.
 Continuous improvement – ways for efficiency
(productivity – reduce cost/waste, increase
quality)
 Information needed – identify opportunities for
improvement, evaluate progress.
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4. MA - issues
 Competitive environment – requires innovative
and relevant mgt accounting practices.
 MA information – focus on customer value,
quality management and competition.
 Strategic decision making- choosing among
alternative strategies with the goal of
reasonable assurance on long term growth
and survival.
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5. MA - issues
 Management empowerment – authorizes
operational personnel plan, control, make
decision (no middle or higher level mgt
intervention)
Why belief employee closest to work (can
provide valuable inputs ideas, plans and
problem solving.
• Activity based management – mgrs focus on
activities with improving customer value
(profit).
- accuracy of cost information (cost to
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6. MA - issues
 Process value analysis – eliminating activities
(non value added) and necessary activities
(efficient)
 Customer Value – diff btw customer receives
(attributes of products/services/quality) and
what the customer gives up (purchase cost,
using and maintaining product).
 -
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7. MA - issues
 Strategic cost management - use cost data to
develop superior strategies (sustainable
competitive advantage)
 - cost leadership strategy ( lower cost than
competitors)
 - product differentation strategy (same cost as
competitor but providing better customer
value)
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8. MA - issues
 Total quality Management (world class firm)
 - producing product with little waste
 - producing according to specifications
 - manufacture zero defect
 - MA provides quality cost information.
 Total quality management emphasized continuous
improvement
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9. MA - issues
 Customer orientation
 Strategic positioning to maintain competitive
advantage
 Cross functional perspective
 importance of value chain from manufacturing
to marketing to distribution to customer service
 E-business for cost reduction
 Time – managers need information to respond
quickly and decisively to changing market
conditions
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10. MA - Objectives
 Costing services, products, other objectives of
interest to management;
 Planning, controlling, evaluating, & continuous
improvement;
 Decision making.
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11. Mgtmt Process
 Planning
 Detailed actions to achieve a particular end
 Controlling
 Monitoring plan implementation & employing
corrective action when necessary (use of
feedback for evaluate)
 Decision making
 Choosing among competing alternatives
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12. Planning
 Setting objectives
 Identifying ways to achieve the objectives
 ■ Example: budgets
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13. Controling
 Monitoring a plan’s implementation
 Feedback is information used to evaluate or
correct implementation of a plan.
 Based on feedback, a manager might:
 – continue the implementation as originally
planned
 – take corrective action if needed, or
 – modify the plan.
 ■ Example: performance reports, feedback
by comparing actual results with plans
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14. Decision Making
 Choosing among competing alternatives
 Example: deciding the selling price of products
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15. Diff btwn FA and MA
 Financial accounting is for external users and
follows restrictive rules and regulations.
 Managerial accounting is for internal users
(managers) who plan, control, and make
decisions.
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17. Certifications
 CMA (Certified Management Accountant)
 knowledge of economics, financial & managerial
accounting, decision analysis & information
systems
 CPA (Certified Public Accountant)
 knowledge of external auditor
 CIA (Certified Internal Auditor)
 specialized needs in internal auditing
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18. Value Chain
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19. Role of Mgmt Accountant
Tightening regulation of
corporate governance
Establishing controls over
management
Raising importance of
management’s assessment of
internal controls
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20. Ethics in MA
- Help managers increase profitability
- Profit maximization should be
achieved through legal and ethical
means.
- Performance evaluation and reward
system (undesirable behavior
minimised)
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21. MA – Code of Ethics
Competence – accordance law
and clear reports
Confidentiality – unethical
advantage
Integrity – conflict of interest
Objectivity- fairly , disclose in
full
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22. Unethical conduct
 Abuse of accounting information
 Acceptance bribes or gifts
 Conflict of interest
 Disclosure of confidential information
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23. Resolution of Conflict
 Resign if exhausting all levels of internal
review
 Communication with external parties not
appropriate if there is legal consequences.
 Discuss with immediate supervisor
 If is the CEO then report to
board/trustee/owners
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