ACCOUNTING FOR DECISION MAKERS - LECTURE 17 & 18

ACCOUNTING FOR DECISION MAKERS - LECTURE 17 & 18 -...

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ACCOUNTING FOR DECISION MAKERS - LECTURE INTRODUCTION TO INTERNAL DECISION MAKING AND BASIC CONCEPTS Management accounting overview Internal decision making and basic concepts Product and service costing Budgeting Capital investment decisions Learning objectives Explain the distinguishing features of management accounting that differs from financial accounting. Describe contemporary developments in management accounting. Identify and explain key cost concepts and terms including distinguishing between variable, fixed and mixed cost behaviour. Describe the cost-volume-profit (CVP) model for evaluating the financial implications of managerial decisions Indicate the meaning of contribution margin and identify break-even point and the use of break-even analysis Gove formulas for determining breakeven points and target net profit. Explain how CVP analysis is used with multiple products. Explain how CVP can be used for planning purposes. Management accounting defined Management accounting field of accounting that provides economic information for use by management in internal planning and decision making. o In financial reporting we were concerned with what information was useful to decision-makers external to the firm, such as investors. Here, our focus is collecting internal and external information and using it for the actual management for the particular firm. Management accounting is the process of gathering, summarising and reporting financial and non-financial information used internally by managers to make decisions.
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A value-adding continuous improvement process of planning designing, measuring and operating both nonfinancial information systems and financial information systems that guides management action, motivate behaviour, and supports and creates the cultural values necessary to achieve an organisation’s strategic, tactical and operating objectives. o An ongoing process that is taken throughout a business as we need to continuously monitor and assess our services to make sure that they are helping us to meet our objectives. Management accounting v Financial accounting Financial accounting provides information for external parties to make economic decisions regarding the entity and can be used by management for internal decision making Management accounting is the creation of reports for us by management in internal planning and decision making, so when reporting can put more emphasis on one particular area of the report. Such reporting is more detailed as we want to understand certain factors and relationships a lot closely so we can make changes. Differences between financial and management accounting include accounting rules, timeliness, level of detail and range of users. Timing is better for management account so we can make better future decisions,
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This note was uploaded on 09/25/2011 for the course ECON 101 taught by Professor Drpearce during the Three '11 term at University of Adelaide.

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ACCOUNTING FOR DECISION MAKERS - LECTURE 17 & 18 -...

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