Who uses information from an accounting system?

Internal managers use accounting information to help them for short term planning and controlling of
routine operations.

Also they use information for making non routine operation decisions, and for formulating overall
policies and long range plans .

Eternal users uses information for making decisions about the company.

The emphases of financial accounting and management differ?

Financial accounting emphasis on the communicate historical information , while management
emphasis on the planning and controlling purposes.

Management accounting is a process of measuring and analyzing and reporting financial and non
financial information that help managers to fulfill the company goals 1. it focuses on future and

2. aims to the influence of the behavior of managers and employees

3. it not particularly contrained by GAAP

While finanacial accounting is a process measuring and recording the business transaction and
provide financial statement primarily to external parties ( accounting information that developed
for external parties ) it contrained by GAAP.

Management acc. Financial acc.

1.Primary user Managers at all levels
2.Freedom of choice (Rules No constraints other than
cost- benefits to improve
management decision
3.Behavioral implications Concern about how
measurement and reports
will influence manager's daily
behavior
4.Time focus Future oriented : formal use
budget as will as historical
records
5.Time span Flexible , ultra current to
very long time horizon
6. types Reports Detailed reports
concern of parts of entity
7.Delineation of activities Field is less sharply defined.
Heavier use of eco, decision
science
External parties
Constrained by GAAP
Concern on how to measure
and communicate economic
phenmoenan behavioral
consideration are secondary
- Executive managers
compensation based
on reported results
may have behavioral
implication or impact
Past orientation : historical
evaluation
Less flexible usually year or
quarter
Summary reports
Concern primarily with whole
entity
Field is more sharply defined ,
lighter use of other disciplines

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 Distinguish among scorekeeping, attention directing , problem solving ?
Scorekeeping ( is the company doing good or bad ?

- is a procees of accumulating and classification of data

- Helps both internal and external parties to evaluate organizational performance later.

Attention directing which areas should we focus more?

- reporting and interpretation of information that help mnagers to focus on operating
problems (inefficiencies , imperfections )
- Associated with current control and plan and analysis
- Analysis of recuurent routine internal accounting part

Problem solving Which is better in doing job?

- Analysis of possibility of results ( evaluation of alternatives ) and recommend the best

alternative to follow or best course of action to follow.
- Long range planning
- Special nonrecurrening decision

Define the following terms ?

Cost accounting: measures and reporting financial and non financial information related to cost of
acquiring or utilizing the resources of the organization. provide for both management and financial
aacounting

Cost management : are approaches and activities of management in short and long run planning and
control decisions that increases value for customers and lower costs of products and services . it
involves on sustain cost reduction and it a major part of management strategies and its
implementation.

Distinguish among a budget , a performance reports and a variance ?

Budget is formal quantitative expression of plan of action or a condensed plan for forthcoming year (
less).

Performance reports: compared actual result with the budget AND PROVIDE FEED BACK

Variance: measures differences between budget and actual results.

Management by Exception : Concentrating on areas that need attention and ignoring areas that
appear to be running smoothly.

Managers use performance reports to investigate exceptions (i.e., items for which actual amounts
differ significantly from budgeted amounts). Operations are then brought into conformity with plans,
or the plans are revised.

COMPARE BETWEEN VALUE AND SUPPLY CHAIN?

Value chain : it is a sequence of the business functions in which value (usefulness ) is added to the
products and services of the firm

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Firms rather than proceeding sequentially through the value chain , its can realize significant gain if
the various parts of the chain work together.

Supply chain : describe flow of good and services and information from initial sources of material to
deliver products to customers whether these activities occur in the organizarion or in other
organization.

1. Research and development : it a process is conducted to generate and experiment with ideas
related to new products and services
2. Design : its a detailed process of planning and engineering products.
3. Production: its a process of acquiring and coordinating and assembly resources to produce
goods or deliver a services.
4. Marketing : it is the manner by which firms promote and sell its products
5. Distribution : it is a process of delivering goods to customers
6. Customer service: After sale support to customer after sale

Q6 Compare between planning and control?

Planning:

Is the setting of objectives and outlining how they will be attained?

Controlling:

Is the implementation of plans and using feedback to attain objectives.

Planning determines action, action generates feedback, and feedback influences further planning and
possible corrective actions.

No. Not all of the functions are of equal importance to the success of a company. Measurement and
reporting should focus on those functions that enable a company to gain and maintain a competitive
edge. In addition, some functions in the value chain may not be present in some organizations.

Q5. Distinguish between staff and line manager ?

Line managers are directly responsible for the production and sale of goods or services. Staff
managers have an advisory function they support line managers.

Q7. Key Success Factors

Customers want companies to use the value chain and supply chain to deliver ever-improving levels
of performance regarding four key success factors:

a. Companies face continuous pressure to reduce the cost of the

products or services they sell. Examples include eliminating the
Cost and efficiency need for rework and outsourcing one or more business functions to

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 foreign countries.

b. Customers expect high levels of quality. Total quality management

(TQM) is a philosophy in which management improves operations
Quality throughout the value chain to deliver products and services that
exceed customer expectations

c.Time Time has many components. Examples include the time to develop
and bring new products to market and the speed at which an
organization responds to customer requests.

d. Innovation A constant flow of innovative products or services is the basis for

ongoing company success. A main source of innovations is R&D.

The five-step decision-making process and its role in management accounting:

(1) Identify the problems and What are the choices that are being faced and where do the
uncertainties uncertainties lie?

Gather information before making a decision helps the

(2) Obtain information
manager to make a more informed decision.

(3) Make predictions about the attempt to predict the outcome of each course of action.
future

(4) Make decisions by choosing Select an alternative.

among alternatives

If the results were not as planned, find out why. Use this
(5) Implement the decision, evaluate
information to improve the decision-making process for future
performance, and learn.
decisions.

Product Life Cycle:

Is the various stages through which a product passes: from conception and development;
introduction into the market; maturation; and, finally, withdrawal from the market.

In the planning process, managers must determine revenues and costs over the entire life cycle.

Accounting also needs to track actual costs and revenues throughout the life cycle.

Periodic comparisons between planned costs and revenues and actual costs and revenues allow
managers to assess the current profitability of a product, determine its current life-cycle stage, and
make any needed changes in strategy.

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