chapter1 - Part I Foundations of Management Accounting...

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Part I Foundations of Management Accounting Chapter 1 Introduction to Management Accounting Chapter 2 Management Accounting and Decision-making Chapter 3 Financial Statements for Manufacturing Businesses Chapter 4 Classifcation oF ManuFacturing Costs and Expenses Chapter 5 Management Accounting Theory of Cost Behavior Chapter 6 Direct Costing Financial Statements
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Management Accounting | 1 Introduction to Management Accounting Introduction Managerial accounting may be regarded as a body of knowledge that is concerned with concepts and decision-making tools that enable management to make better decisions and to evaluate results. As a body of technical knowledge, management accounting primarily consists of certain decision-making techniques or tools drawn from Fnancial and management theory and practice. A basic premise is that the primary task of management is to make decisions and that this task is greatly improved by the knowledge and skills of the management accountant. A corollary premise is that the management accountant’s ability to serve management is greatly enhanced by a knowledge of management and, in particular, a sound knowledge of the fundamentals of marketing, production, and Fnance. This book is based on the assumption that the accountant in the role of advisor to management must understand basic management concepts, particularly those concepts embedded in the function of decision-making. Only if the accountant has a proper understanding of management’s needs will he or she be able to furnish the data and special analyzes that will enable management to make consistently good decisions. Conversely, this book assumes that management must understand accounting and the type of information that the accountant can provide. Without an understanding of some accounting, the manager or decision-maker may fail to request information or seek help at a critical time. Therefore, this book is written for two groups of individuals: accountants and managers. The accountants, of course, are expected to acquire a higher degree of proFciency in the use of the planning and control techniques presented.
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2 | CHAPTER ONE Introduction to Management Accounting Defnition oF Management Accounting What is accounting? A very old but frequently used deFnition states: “Accounting is the art of recording, classifying, and summarizing in a signiFcant manner and in terms of money, transactions, and events, which are, in part at least of a Fnancial character, and interpreting the results thereof.” (AIA Bulletin No. 1 - Review and Resume) A more recent deFnition states: “Accounting is a service activity. Its function is to provide quantitative information, primarily Fnancial in nature, about economic entities that is intended to be useful in making economic decisions in making reasoned choices among alternative courses of action.” (APB Statement No. 4) This latter deFnition is more appropriate to managerial accounting because of its emphasis on
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This note was uploaded on 03/23/2010 for the course ACC_ 02 taught by Professor Zeegal during the Fall '10 term at Missouri State University-Springfield.

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chapter1 - Part I Foundations of Management Accounting...

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