ch01 - Introduction of the course : Management Accounting...

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Unformatted text preview: Introduction of the course : Management Accounting 1-1 Introduction Introduction Gao Chen PhD Gao Finance Department in BTBU Business School Finance Teaching experience Management Accounting and Corporate Finance Finance Advance Management Accounting Advance Research interest Research Management control systems Management Performance measurement Performance Planning and budgeting Planning Email: gaochen@th.btbu.edu.cn 13701193133 13701193133 Course Overview Course 1. Become familiar with what accounting 1. information is typically used within the firm. within 2. Develop an understanding of how accounting information is used by managers in the decision making process. decision 3. Consider how accounting information can be used to motivate members of the firm or as a mechanism to control their behavior. Course textbook Course Horngren, Sundem, Stratton, Horngren, Introduction to Management accounting, 12th Edition,Pearson Education.2002. Education.2002. È h ¦ ik·y ª· ’’ ª 14 h h y · ª ’ è à n 2010.1. h h 2010.1. Course Syllabus Course Part One: introduction----MA and organization (chapter 1,2) (chapter Part Two: Accounting for management Part decision---Marketing Decisions; Product Planning; Capital Budgeting (chapter 5,6,11) Planning; Part three: Accounting for Planning and Part Control---Budgeting, management control(Chapter7,8,9,10) control(Chapter7,8,9,10) Suggested Readings Suggested 1.Atkinson, Banker, Kaplan, Young, 1.Atkinson, Management accounting, Third Edition,Prentice Hall.2001. Management « ik·y ª· ’’ ˆh ª 3 h i y· ª’ è ™ 9 2003 à† É Management Accounting Quarterly a Management Accounting Research Management h http://www.imanet.org 2.Jerold L.Zimmerman • h h y · ª 7 3. n y hh 4hh y·ª 7 J. Œ h h y à †É Q · ª7 è ™Z · à †É QªÉ Q http://www.cimaglobal.com à †É Q Ð ‡É Q ª É Q Ð ‡É Q ¿@Ls ¿ @L j«ÉQ n 2005 h h 2000 n j«É h h Course Requirements a thorough preparation and analysis of the assigned cases, problems, and reading material, and active participation in the classroom. classroom. Grading 1 Case write-up to be done on a group basis 15% group 2 assignments done individually 20% 3 Final Exam 60% 4 Discretion 5% Discretion Managerial Managerial Accounting and the Business Organization Organization Chapter 1 1-9 Learning Objectives LO1:Describes the major users and uses of accounting information of LO2: Describe the cost-benefit and LO2: Describe behavioral issues involved in designing an behavioral accounting system accounting LO3:Discuss the role accountants play in LO3:Discuss the company’s value chain functions. the LO4:MA’s position in the organization LO5:Identify curret trends in management LO5:Identify accounting accounting Learning Objective 1 Learning Describe the major users and uses of accounting information. Who need and use the accounting information? information? Users of Accounting Information Accounting External parties: Investors Government authorities use information for information making decisions about the company. Users of Users Accounting Information Internal managers… use information for day-to-day information operating decisions... and for long-range strategic decisions. Both parties use accounting information, but do you think they need and use the same information and in same way? Let’s identify the differences between MA and FA now. between The basic difference is the user or audience: Management accounting Management provides information for managers ______an organization who direct and control its operations. Financial accounting provides information to stockholders, creditors and others(?) who are ______ ______ the organization. Other major differences between these two branches of accounting are restrictions Purpose Time dimension Type of information Scope FA and MA Basic Features FA FA Audience Purpose Timeliness Restrictions Type of information Nature of information Scope MA FA and MA Basic Features FA FA Audience Purpose Timeliness Restrictions Type of information Nature of information Scope External:Stockholder, creditor, tax authorities MA Internal:Workers, Managers,executive FA and MA Basic Features FA FA Audience Purpose External:Stockholder, creditor, tax authorities Report on past performance; MA Internal:Workers, Managers,executives Inform internal decision;feedback control Timeliness Restrictions Type of information Nature of information Scope FA and MA Basic Features FA FA Audience Purpose External:Stockholder, creditor, tax authorities Report on past performance; Delayed; historical MA Internal:Workers, Managers,executive Inform internal decision;feedback control Current, future oriented Timeliness Restrictions Type of information Nature of information Scope FA Audience External:Stockholder, creditor, tax authorities Report on past performance; Delayed; historical Regulated;rules driven(Is it necessary?) MA Internal:Workers, Managers,executive Inform internal decision;feedback control Current, future oriented No regulation Purpose Timeliness Restrictions Type of information Nature of information Scope FA Audience Purpose External:Stockholder, creditor, tax authorities Report on past performance; Delayed; historical Regulated;rules driven Financial only MA Internal:Workers, Managers,executive Inform internal decision;feedback control Current, future oriented No regulation Financial and Nonfinancial Timeliness Restrictions Type of information Nature of information Scope FA Audience Purpose External:Stockholder, creditor, tax authorities Report on past performance; Delayed; historical Regulated;rules driven Financial only Objective, reliable, consistent, auditable MA Internal:Workers, Managers,executive Inform internal decision;feedback control Current, future oriented No regulation Financial and Nonfinancial More subjective and judgmental; Timeliness Restrictions Type of information Nature of information Scope FA Audience Purpose External:Stockholder, creditor, tax authorities Report on past performance; Delayed; historical Regulated;rules driven Financial only Objective, reliable, consistent Highly aggregate MA Internal:Workers, Managers,executive Inform internal decision;feedback control Current, future oriented No regulation Financial and Nonfinancial More subjective and judgmental; disaggregate Timeliness Restrictions Type of information Nature of information Scope What is Management Accounting? Accounting? The process of identifying, measuring, The accumulating, analyzing, preparing, interpreting and communicating information that helps managers fulfill organization objectives. A value-adding continuous improvement process of planning, designing, measuring and operating both nonfinancial information systems and financial information systems that guides management action, motivates behavior, and supports and creates the cultural values necessary to FM is reporting the value, MA is creating the value. creating How accounting information is used by managers in the organization? organization? Uses of Uses Accounting Information Am I doing well or poorly? This is the accumulating and This classification of data. classification Uses of Uses Accounting Information Which problems should I look into? Attention directing means reporting and Attention interpreting information that helps managers to focus on operating problems, managers inperfection, inefficiencies, and opportunities. Uses of Uses Accounting Information This role asks: Of the several alternatives available, which is the best? This often involves special studies. Uses of Uses Accounting Information Scorekeeping and attention-directing uses Scorekeeping are closely related. The same information may serve two uses. (Example: Performance Example: may report show managers how they are doing and where to take action) to Problem-solving information may be used in long-range planning and in making special decision. keep in mind MA information is a key source of information for MA key decision making, improvement, and control in organizations organizations Effective MA systems can create considerable Effective value to today’s organizations by providing value timely and accurate information about the activities required for their success activities Quick check Quick 1.MA information is developed for the following constituents: (a)workers (b)bondholders (C)managers (d)executives 2.MA has the following characteristics EXCEPT: 2.MA (a)current,future oriented (b) not regulated (a)current,future (c )disaggregate (d) auditable (c 3. Companies have considerable choice in the design of their management 3. accounting systems. ( ) accounting 4. Management accounting information includes the cost and profitability of 4. an organization's products, departments, services, and activities. () Learning Objective 2 Learning Describe the cost-benefit and behavioral issues involved in designing an accounting system. Cost-Benefit and Behavioral Considerations Considerations 1. Cost-benefit balance 2. Behavioral implications Cost-Benefit Balance Cost-Benefit The primary consideration in choosing among accounting systems and methods is weighing estimated costs against probable benefits. The value of a system must be seen The as exceeding its cost. as Using a sample of 78 startup companies, we find Using the initial focus is on budgeting systems which is on average the earliest of the systems adopted in the firms examined. adopted Tony Davila & George Foster Tony Management accounting systems adoption decisions: evidence and performance implications from startup companies, the Accounting Review,2005. companies, Behavioral Implications Behavioral The accounting system affect employees’ Feeling and behavior (decisions). “What gets measured gets managed” People just focus on the variables and Behaviors being measured and spends less attention to those not being evaluation Behavioral Implications Behavioral Keep in mind: -------Management accountants must understand Management and anticipate the reactions of individuals to information and measurements when designing or introducing a new MA systems . ---------Morethan financial accounting, Management accounting spills over into related disciplines, such as economics, the behavioral sciences, psychology, and decision sciences. psychology, Learning Objective 3 Learning Explain the role of budgets and performance reports in planning and control. The Nature of Planning and Controlling Controlling Management process is a series of activities in a cycle of planning and control. in Planning: setting of objectives and Planning: outlining how they will be attained. Controlling - the implementation of plans of and using feedback to attain objectives. using Both stage involves decision making. The Nature of Planning and Controlling Controlling Decision making It is the purposeful choice from among a set of alternative courses of action designed to achieve some objective. This is the core of the management process. Role of Budgets Role A budget is a quantitative expression of a plan of action. The restaurant would express its plan for product growth and improved marketing through revenue and advertising budgets. Performance Reports Performance What are performance reports? Performance reports formalize controls and provide feedback by comparing results with plans and by highlighting variances. Managers use performance report to help Managers Appriase how effectively and efficiently the Department is operating and investigate exception. Performance Reports The Chop House restaurant, March 31, 2004 The Sales Less: Ingredients Store labor Other labor Other Utilities, etc. Utilities, Total expenses Operating income Operating Budget Budget $50,000 22,000 12,000 6,000 4,500 $44,500 $ 5,500 Actual Actual $50,000 24,500 11,600 6,050 4,500 $46,650 $ 3,350 Variance Variance 0 $2,500 400 50 0 $2,150 $2,150 $2,150 $2,150 Management by exception Management Concentrating on areas that need attention and ignoring areas that appear to be running smoothly. Objective 3 Objective Discuss the role accountants play in the company’s value chain functions. What is an organization? What From the view of economics From -----a nexus of contracts -----a From the view of management From ------hierarchy ------hierarchy Form the view of management Form accountant:? Value Chain Functions Value Research and development… is the generation of, and experimentation with, ideas related to new products, services, or processes. Value Chain Functions Value Design… is the detail and engineering of products. Value Chain Functions Value Production… is the coordination and assembly of resources to produce a product or deliver a service. Value Chain Functions Value Marketing… is the manner by which individuals or groups learn about the value and features of products or services. Value Chain Functions Value Distribution… is the mechanism by which products or services are delivered to the customer. Value Chain Functions Value Customer service… is the support activities provided to the customer. MA in value chain function MA MA play a key role in all value-chain function. Estimated revenue and cost data in R$D; data Tracking the effects of Tracking continuous continuous Improvement in Production; Providing data for pricing; Objective 4 Objective MA’s position in the organization Controller and Treasurer Functions Functions Financial Vice-President or CFO Treasurer Controller Functions of the Controller Functions Planning for control Planning Reporting and interpreting Reporting Evaluating and consulting Evaluating Tax administration Tax Government reporting Government Protection of assets Protection Economic appraisal Economic Functions of the Treasurer Functions Provision of capital Provision Investor relations Investor Short-term financing Short-term Banking and custody Banking Credits and collections Credits Investments Investments Risk management (insurance) Risk Learning Objective 6 Learning Identify current trends in management accounting. Current Trends Current Shift from a manufacturing-based to a service-based economy Increased global competition Advances in technology Current Trends Current The most important recent change is adoption of The a Just-in-time (JIT) philosophy Just-in-time Eliminate the waste ----reduce the time in the production process ----eliminate the time that products spend on ----eliminate Activities that do not add value Activities Implications of JIT for MA Implications Measures of a JIT systems’ reliability Measures would include: would Defect rates Cycle times Percent of time that deliveries are on time Order accuracy Actual production as a percent of planned production Actual machine time available compared to planned Actual machine time available. machine Implications for your study Implications Accounting changes as the world Accounting changes. changes. Learning Objective 8 Learning Appreciate the importance of ethical conduct to professional accountants. End of Chapter 1 1 - 74 74 ...
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