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Learning Objectives
When you have finished studying this chapter, you should be able to: 1. Describe the major users and uses of accounting information. 2. Describe the cost-benefit and behavioral issues involved in designing an accounting system. 3. Explain the role of budgets and performance reports in planning and control.
4. Discuss the role accountants play in the companys value-chain functions. 5. Identify current trends in management accounting. 6. Explain why ethics and standards of ethical conduct are important to accountants.
Learning Objective 1
Decision Making
Scorekeeping: Evaluate Organizational Performance Problem Solving: Assess Possible Courses of Action
Financial Statements
Management audits
Learning Objective 2
Cost-benefit balance
Accounting information helps managers plan and control the organizations operations.
Planning: Setting objectives and outlining how the objectives will be obtained.
Control: Implementing plans and using feedback to evaluate the attainment of objectives.
Competitor analysis
Advertising impact New items report
Performance Reports
Learning Objective 3
Performance reports: compare actual results with budgeted amounts provide feedback by comparing results with plans highlight variances
Performance Reports
Mayfair Starbucks Store, March 31, 20X1
Sales Less: Ingredients Store labor Other labor Utilities, etc. Total expenses Operating income
Budget $50,000 22,000 12,000 6,000 4,500 $44,500 $ 5,500 Actual $50,000 24,500 11,600 6,050 4,500 $46,650 $ 3,350 Variance 0 $2,500 U 400 F 50 U 0 $2,150 U $2,150 U
Product life cycle refers to the various stages through which a product passes.
No Sales
Sales Growth
Product Development
Introduction to Market
Mature Market
Phase-out Product
Service
Customer Focus
Distribution
Marketing
Production
Learning Objective 4
Management
Cross-functional teams: Found in modern, flatter organizations; Functional areas work together in decision-making process.
Accounting Function
Chief Financial Officer (CFO)
Controller Functions
Planning for control Reporting and interpreting Evaluating and consulting Tax administration
Treasurer Functions
Provision of capital
Investor relations Short-term financing Banking and custody
Government reporting
Protection of assets Economic appraisal
Learning Objective 5
Shift from a manufacturing-based to a service-based economy Increased global competition Advances in technology Changes in business processes
Learning Objective 6
Management Accounting professionals are required to adhere to a code of conduct regarding: Competence, Confidentiality, Integrity, and Credibility.
Ethics
Reliability
Trust Integrity
Ethical Dilemmas
Managers must choose an alternative and there are: Significant value conflicts among differing interests. Real alternatives that are all justifiable, and Significant consequences on stakeholders in the situation.
Ignoring the small stuff: Large misdeeds often result from many small ones.
2.
Accounting rules: Avoid creative interpretations of the rules. Practice full and fair disclosure to convey companys performance.
4.