Week 7 - ACCY 111 RJD Lecture 1

Relevance and feral systems line managers will ignore

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Relevance and ‘Feral Systems’ Line managers will ignore formally produced accounting information unless it can be shown to be of value to them, and may develop alternative and informal information systems alongside the official system. The responsibility lies with the accounting information systems designer to develop a deeper understanding of the information requirements of specific tasks so as to be able to provide more relevant information. [Otley, 1991]
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Financial vs. Management Accounting Financial Accounting Management Accounting Reports to those outside the organisation – owners, lenders, tax authorities and regulators. Reports to those inside the organisation for planning, directing and motivating, controlling and performance evaluation. Emphasis is on summaries of financial consequences of past activities. Emphasis is on decisions affecting the future. The objectivity and verifiability of the data is emphasised. The relevance of items relating to decision making is emphasised.
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Financial vs. Management Accounting Financial Accounting Management Accounting Precision of information is required. Timeliness of information is required Only summarised information for the whole organisation is prepared Detailed segment information about departments, products, customers, and employees is prepared. Must follow GAAP Need not follow GAAP Financial accounts are mandatory Management accounts are not mandatory.
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Summary Accounting is an information system concerned with the collection, analysis and communication of economic information. It assists in decision making and planning and control by resource providers, recipients of goods and services, reviewers and managers. Financial and management accounting information is not entirely distinct.
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Summary Accounting is a ‘language ’ by which we describe and understand organisations and human endeavour. Beware numerical reductionism and the assumption of objectivity . Management accounting, in particular, also employs a range of non-financial information. Management decisions are also based on values and prior expectations. Accounting, and particularly management accounting, is a career path to leadership .
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Next Time: Planning and control, and Strategic management accounting Please read: Chapter 1pp. 9 – 16 Chapter 15 pp. 692 - 696
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