Management Accounting

- ...interrelated manual and computer parts

- ...collecting, recording, summarizing, analyzing and managing data to... transform inputs into information provided to users

- a) Financial Accounting information system (external)
  b) Cost Management Accounting information system (internal)

      -> main difference: targeted user

- external users

- e.g. financial statements

-> Follows rules and conventions set by the regulators and standard setters. Companies have to become comparable.

- internal users

- a) Costing out services, products, and other objects of interest to management
  b) planning and control (forward-looking and checking if target is achieved)
  c) decision making

-> criteria and formats are set internally (e.g. they decide for themselves how they account for inventory because some specific information might be needed....)

Cost Accounting information system (satisfies objective 1, costing out services, products, and other objects of interest to management)

- Assigns costs to individual products and services

- Assists external financial reporting

- Conforms to the rules and conventions set by regulators and standard setters

Operational Control information system (satisfies objective 2, planning and control)

- provides accurate and timely feedback concerning the performance of managers and others

- concerned with what activities should be performed and assessing how well they are performed

- increases profit by increasing customer value

- purely internal

1. Global Competition 

2. Growth of the Service Industry (and thus increased competition)

3. Advances in Information Technology (computers to control operations, ERP systems, e-commerce...)

4. Advances in the Manufacturing Environment (e.g. theory of constraints, just-in-time manufacturing, lean manufacturing, computer-integrated manufacturing...)

5. Customer Orientation

6. New Product Development (demand for more sophisticated cost mgmt procedures such as target costing and activity-based management)

7. Toal Quality Management (Continuous improvement and elimination of waste)

8. Time as a competitive element (correlation between cost and time; decrease non-value-added time)

9. Efficiency (cost is a critical measure of efficiency)

Line Position

Position with direct responsibility for the basic objectives of an organization (e.g. production manager)

Staff Position

Position that is supportive in nature and has only indirect responsibility for the basic objectives of an organization (e.g. cost accountant or HR manager)

Controller (Chief Accounting Officer)

- Supervises all accounting departments

- Participates in planning, controlling, and decision making activities

- Responsible for both internal and external accounting requirements

Treasurer

- Responsible for finance function

- Raises capital, manages cash, investment, and Investor Relations

- In charge of credit and collections as well as insurance

Planning

- detailed formulation of future actions to achieve a particular end

- requires setting objectives and identifying methods to achieve those objectives

Controlling

- a managerial activity of monitoring a plan’s implementation and taking corrective action

- achieved with the use of feedback

Continuous Improvement

- relentless pursuit of improvement in the delivery of value to customer

- required to remain competitive or to establish a competitive advantage

Decision Making

- process of choosing among competing alternatives