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MANAGEMENT
ACCOUNTING
FOR DECISION MAKERS
F01 Management Accounting for Decision Makers 49459.indd 1 23/09/2020 17:05

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TENTH EDITION
MANAGEMENT
ACCOUNTING
Peter Atrill and
Eddie McLaney FOR DECISION MAKERS
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First published 1995 by Prentice Hall Europe (print)

Second edition published 1999 by Prentice Hall Europe (print)
Third edition published 2002 by Pearson Education Limited (print)
Fourth edition published 2005 (print)
Fifth edition published 2007 (print)
Sixth edition published 2009 (print)
Seventh edition published 2012 (print and electronic)
Eighth edition published 2015 (print and electronic)
Ninth edition published 2018 (print and electronic)
Tenth edition published 2021 (print and electronic)
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ISBN: 978-1-292-34945-9 (print)

978-1-292-34946-6 (PDF)
978-1-292-34951-0 (ePub)
British Library Cataloguing-in-Publication Data
A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Atrill, Peter, author. | McLaney, E. J., author.
Title: Management accounting for decision makers / Peter Atrill and Edward
McLaney.
Description: Tenth edition. | Harlow, England ; New York : Pearson, 2021. |
Includes bibliographical references and index. | Summary: “In this
edition, we have taken the opportunity to improve the book. We have
expanded on the changing role of management accountants to enable them
to retain their place at the centre of the decision-making and planning
process. In Chapter 1, we have included the recently developed statement
of Global Management Accounting Principles. These principles have been
identified (by the leading management accounting professional bodies in
the UK and US) as those to be followed when determining the information
that managers need. In Chapter 7, we have brought in a discussion of
current thinking and practice in the area of management control.
Throughout this new edition, we have included additional, and more
up-to-date, examples of management accounting in practice. We have also
added more in-chapter questions and diagrams”-- Provided by publisher.
Identifiers: LCCN 2020032735 | ISBN 9781292349459 (hardback)
Subjects: LCSH: Managerial accounting. | Decision making.
Classification: LCC HF5657.4 .A873 2021 | DDC 658.15/11--dc23
LC record available at https://lccn.loc.gov/2020032735
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Print edition typeset in 9.25/13 pt Helvetica Neue LT W1G by SPi Global
Printed in Slovakia by Neografia
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

Brief contents
Preface xvii
How to use this book xix
Acknowledgements xxi
1 Introduction to management accounting 1

2 Relevant costs and benefits for decision making 42
3 Cost–volume–profit analysis 66
4 Full costing 107
5 Costing and cost management in a competitive environment 154
6 Budgeting 197
7 Accounting for control 243
8 Making capital investment decisions 286
9 Managing risk 333
10 Strategic management accounting: performance
evaluation and pricing in a competitive environment 360
11 Measuring divisional performance 413
12 Managing working capital 459
Appendix A Glossary of key terms 513

Appendix B Solutions to self-assessment questions 522
Appendix C Solutions to critical review questions 534
Appendix D Solutions to selected exercises 544
Appendix E Present value table 584
Index 587
Credits 601
BRIEF CONTENTS v

Contents
Preface xvii
How to use this book xix
Acknowledgements xxi
1 Introduction to management accounting 1

Introduction 1
Learning outcomes 1
What is the purpose of a business? 2
How are businesses organised? 3
How are businesses managed? 6
Establish mission, vision and objectives 7
Undertake a position analysis 9
Identify and assess the strategic options 10
Select strategic options and formulate plans 10
Perform, review and control 10
The changing business landscape 11
What is the financial objective of a business? 12
Balancing risk and return 14
What is management accounting? 16
How useful is management accounting information? 18
Providing a service 18
Weighing up the costs and benefits 20
Management accounting as an information system 22
It’s just a phase 23
What information do managers need? 25
Reporting non-financial information 27
Influencing managers’ behaviour 28
Reaping the benefits of information technology 29
From bean counter to team member 30
Reasons to be ethical 32
Management accounting and financial accounting 34
Summary 36
Key terms 39
References 39
Further reading 39
Critical review questions 39
Exercises 40
CONTENTS vii

2 Relevant costs and benefits for decision making 42
Introduction 42
Learning outcomes 42
Cost–benefit analysis 43
What is meant by ‘cost’? 44
Relevant costs: opportunity and outlay costs 46
Irrelevant costs: sunk costs and committed costs 49
Sunk cost fallacy 50
Determining the relevant cost of labour and materials 51
Labour 51
Materials 54
Non-measurable costs and benefits 56
Summary 58
Key terms 59
Further reading 59
Exercises 60
3 Cost–volume–profit analysis 66
Introduction 66
Cost behaviour 67
Fixed cost 67
Variable cost 69
Semi-fixed (semi-variable) cost 70
Analysing semi-fixed (semi-variable) costs 70
Finding the break-even point 72
Contribution 78
Contribution margin ratio 79
Margin of safety 79
Achieving a target profit 81
Operating gearing and its effect on profit 82
Profit–volume charts 84
The economist’s view of the break-even chart 85
The problem of breaking even 87
Weaknesses of break-even analysis 87
Using contribution to make decisions: marginal analysis 90
Pricing/assessing opportunities to enter contracts 91
The most efficient use of scarce resources 93
Make-or-buy decisions 95
Closing or continuation decisions 97
Summary 100
Key terms 101
Further reading 101
Exercises 102
viii CONTENTS

4 Full costing 107
Introduction 107
What is full costing? 108
Why do managers want to know the full cost? 108
Single-product businesses 110
Process-costing problems 111
Multi-product businesses 113
Direct and indirect cost 114
Job costing 115
Full costing and cost behaviour 116
The problem of indirect cost 118
Overheads as service renderers 118
Job costing: a worked example 118
Selecting a basis for charging overheads 123
Segmenting the overheads 126
Dealing with overheads on a cost centre basis 127
Batch costing 137
Non-manufacturing overheads 139
Full (absorption) costing and estimation errors 140
Full (absorption) costing and relevant costs 141
Full (absorption) costing versus variable costing 142
Which method is better? 144
Summary 146
Key terms 148
Reference 148
Further reading 148
Exercises 149
5 Costing and cost management in a

competitive environment 154
Introduction 154
Cost determination in the changed business environment 155
Costing and pricing: the traditional way 155
Costing and pricing: the new environment 155
Cost management systems 157
The problem of overheads 157
Taking a closer look 157
Activity-based costing 158
Assigning overheads 159
ABC and the traditional approach compared 160
ABC and service industries 161
Benefits and costs of ABC 165
ABC in practice 167
CONTENTS ix

Managing costs over the product life cycle 169
Total life-cycle costing 170
Target costing 172
Kaizen costing 175
Other approaches to managing costs in the modern environment 178
Value chain analysis 178
Benchmarking 180
Total quality management 184
Managing quality costs 186
An alternative view 188
Summary 191
Key terms 192
Reference 192
Further reading 192
Exercises 193
6 Budgeting 197
Introduction 197
How budgets link with strategic plans and objectives 198
Exercising control 199
Time horizon of plans and budgets 201
Budgets and forecasts 202
Periodic and continual budgets 202
Limiting factors 203
How budgets link to one another 203
How budgets help managers 206
The budget-setting process 208
Step 1: Establish who will take responsibility 208
Step 2: Communicate budget guidelines to relevant managers 208
Step 3: Identify the key, or limiting, factor 208
Step 4: Prepare the budget for the area of the limiting factor 209
Step 5: Prepare draft budgets for all other areas 209
Step 6: Review and coordinate budgets 209
Step 7: Prepare the master budgets 210
Step 8: Communicate the budgets to all interested parties 210
Step 9: Monitor performance relative to the budget 210
Using budgets in practice 211
Incremental and zero-base budgeting 213
Preparing budgets 216
The cash budget 216
Preparing other budgets 220
Activity-based budgeting 222
Non-financial measures in budgeting 225
Budgets and management behaviour 225
Problems with budgets 226
Beyond conventional budgeting 228
The future of budgeting 230
x CONTENTS

Summary 233
Key terms 234
References 234
Further reading 234
Exercises 235
7 Accounting for control 243

Introduction 243
Budgeting for control 244
Types of control 245
Variances from budget 247
Flexing the budget 247
Sales volume variance 248
Sales price variance 251
Materials variances 252
Labour variances 253
Fixed overhead variance 254
Reconciling the budgeted profit with the actual profit 255
Reasons for adverse variances 259
Variance analysis in service industries 261
Non-operating-profit variances 261
Investigating variances 261
Variance analysis in practice 264
Compensating variances 264
Standard quantities and costs 265
Setting standards 266
Who sets the standards? 266
How is information gathered? 266
What kind of standards should be used? 267
The learning-curve effect 267
Other uses for standard costing 268
Some problems 269
The new business environment 271
Making budgetary control effective 272
Behavioural issues 273
Failing to meet the budget 274
Budgets and management autonomy 275
Types of management control 275
Direct control 275
Indirect control 276
Summary 278
Key terms 280
Reference 280
Further reading 280
Exercises 281
CONTENTS xi

8 Making capital investment decisions 286
Introduction 286
The nature of investment decisions 287
Investment appraisal methods 288
Accounting rate of return (ARR) 290
ARR and ROCE 291
Problems with ARR 292
Payback period (PP) 294
Problems with PP 296
Net present value (NPV) 298
Why does time matter? 299
Interest lost 299
Risk 299
Inflation 300
What should managers do? 300
Dealing with the time value of money 301
Calculating the net present value 303
Using present value tables 304
The discount rate and the cost of capital 305
Why NPV is better 306
NPV and economic value 306
Internal rate of return (IRR) 307
Problems with IRR 310
Some practical points 311
Investment appraisal in practice 314
Investment appraisal and strategic planning 317
Managing investment projects 318
Stage 1: Determine investment funds available 318
Stage 2: Identify profitable project opportunities 319
Stage 3: Evaluate the proposed project 319
Stage 4: Approve the project 319
Stage 5: Monitor and control the project 320
Summary 323
Key terms 324
References 325
Further reading 325
Exercises 326
9 Managing risk 333

Introduction 333
Dealing with risk 334
xii CONTENTS

Assessing the level of risk 334
Sensitivity analysis 334
Strengths and weaknesses of sensitivity analysis 341
Scenario analysis 343
Expected values 343
Reacting to the level of risk 351
Summary 352
Key terms 353
Further reading 354
Exercises 354
10 Strategic management accounting: performance

evaluation and pricing in a competitive environment 360
Introduction 360
What is strategic management accounting? 361
Facing outwards 362
Competitor analysis 362
Customer profitability analysis 366
Competitive advantage through cost leadership 370
Non-financial measures of performance 372
The balanced scorecard 373
Scorecard problems 380
Measuring shareholder value 380
The quest for shareholder value 381
How can shareholder value be created? 381
The need for new measures 382
Economic value added (EVA®) 383
Shareholder value-based management in practice 388
Just another fad? 389
Pricing 389
Economic theory 389
Some practical considerations 397
Full cost (cost-plus) pricing 398
Pricing on the basis of marginal cost 400
Target pricing 402
Pricing strategies 402
Summary 406
Key terms 407
References 407
Further reading 407
Exercises 408
CONTENTS xiii

11 Measuring divisional performance 413
Introduction 413
Divisionalisation 414
Why do businesses divisionalise? 414
Devolving decisions 414
Divisional structures 416
Is divisionalisation a good idea? 416
Measuring divisional profit 421
Contribution 421
Controllable profit 422
Divisional profit before common expenses 422
Divisional profit for the period 423
Divisional performance measures 424
Return on investment (ROI) 424
Residual income (RI) 428
Looking to the longer term 429
Comparing performance 431
EVA® revisited 432
Transfer pricing 433
The objectives of transfer pricing 434
Transfer pricing and tax mitigation 436
Transfer pricing policies 438
Market prices 438
Variable cost 439
Full cost 439
Negotiated prices 440
Divisions with mixed sales 441
Differential transfer prices 443
Transfer pricing and service industries 445
Non-financial measures of performance 445
What is measured? 446
Choosing non-financial measures 449
Who should report? 449
Summary 451
Key terms 453
Further reading 453
Exercises 454
12 Managing working capital 459

Introduction 459
What is working capital? 460
Managing working capital 461
The scale of working capital 461
xiv CONTENTS

Managing inventories 464
Budgeting future demand 466
Financial ratios 466
Recording and reordering systems 466
Levels of control 469
Inventories management models 471
XYZ inventories management 477
Managing trade receivables 478
Which customers should receive credit and how much should they be
offered? 479
Length of credit period 480
An alternative approach to evaluating the credit decision 483
Cash discounts 484
Debt factoring and invoice discounting 485
Credit insurance 485
Collection policies 485
Reducing the risk of non-payment 489
Managing cash 490
Why hold cash? 490
How much cash should be held? 490
Controlling the cash balance 491
Cash budgets and managing cash 492
Operating cash cycle 493
Cash transmission 497
Bank overdrafts 498
Managing trade payables 498
Taking advantage of cash discounts 499
Controlling trade payables 500
Managing working capital 500
Summary 503
Key terms 505
Further reading 506
Exercises 507
Appendix A Glossary of key terms 513

Appendix B Solutions to self-assessment questions 522
Appendix C Solutions to critical review questions 534
Appendix D Solutions to selected exercises 544
Appendix E Present value table 584
Index 587
Credits 601
Lecturer Resources ON THE

WEBSITE
For password-protected online resources tailored to
support the use of this textbook in teaching, please visit
go.pearson.com/uk/he/resources
CONTENTS xv

Preface
Welcome to the tenth edition of Management Accounting for Decision Makers. This book is
directed primarily at those following an introductory course in management accounting. Many
readers will be studying at a university or college, perhaps majoring in accounting or in another
area, such as business studies, IT, tourism or engineering. Other readers, however, may be
studying independently, perhaps with no qualification in mind.
The book is written in an ‘open learning’ style, which has been adopted because we believe
that readers will find it more ‘user-friendly’ than the traditional approach. Whether they are
using the book as part of a taught course, or for personal study, we feel that the open learning
approach makes it easier for readers to learn.
In writing this book, we have been mindful of the fact that most readers will not have studied
management accounting before. We have tried to make the topic accessible to readers in a
number of ways. This includes avoiding unnecessary jargon. Where technical terminology is
unavoidable, we have given clear explanations. At the end of the book (in Appendix A) there
is a glossary of technical terms, which readers can use to refresh their memory if they come
across a term whose meaning is in doubt. In the book, we also introduce topics gradually,
explaining everything as we go. We have included frequent questions and tasks of various
types to try to help readers to understand the subject fully, in much the same way as a good
lecturer would do in lectures and tutorials. These questions and tasks have been framed in a
way that is designed to encourage readers to help improve their critical thinking. Many of the
questions and tasks require readers to think beyond the material in the text and/or to link the
current topic with material covered earlier in the book. More detail on the nature and use of
these questions and tasks is given in the ‘How to use this book’ section immediately following
this preface.
A note to students from the authors

Management accounting is concerned with providing information to those who need to make
financial/economic decisions about their organisation. Such decisions could involve such
things as:
■ assessing how much inventories (stock) a retail outlet should hold for optimal profitability;
■ deciding whether to abandon a particular product by a manufacturing business on the basis
of its profitability:
■ appraising the economic desirability of investing in new equipment that would enable a
business to provide a new service to its customers; and
■ a government weighing the costs and benefits of building a high-speed rail link from London
to Birmingham and the North.
It should be clear that these types of decision have a real impact on businesses, those who
work for them and for their customers. Getting these decisions wrong could have profound
effects, perhaps leading to a business collapsing, throwing its employees out of work and
PREFACE xvii

depriving customers of a product or service that they wish to buy. In the case of the rail link,
the impact is felt by the taxpayer who will fund the project, people who live on or near the
proposed route and, eventually, those who will travel on the line.
To relate the subject matter of the book to real life, each chapter includes a number of
‘Real world’ examples. These are generally short case studies that examine how a particular
business has approached a particular management accounting issue. In some cases, they are
presentations of research evidence as how organisations, in general, deal with such issues.
Evidence from students who have used past editions indicates that these can help to bring
the subject to life.
When you have completed your studies and are working in an organisation, you will need
to have the ability to solve problems. It is also crucial for you to be able to communicate your
solutions to colleagues and to customers. To do this you will need to develop a capacity to
think critically. ‘Critical thinking’ can be defined as the analysis of facts to form a judgement.
In analysing the facts, it is important that factual evidence is used in a logical way. It is also
important that a sceptical and questioning approach to the evidence is applied. When recruit-
ing, organisations are increasingly looking for evidence that potential employees can think
critically when seeking to solve problems.
In writing this book, we have been aware of the need to encourage critical thinking. The
‘Activities’ (typically short questions) that are interspersed throughout the book are designed,
among other things, to try to develop the appropriate critical thinking skills. This is also true
of the ‘Critical review questions’ at the end of each chapter. Similarly with many of the end-
of-chapter ‘Exercises’.
We hope that students will find the book readable and helpful.
A note to lecturers and tutors from the authors

In this edition, we have taken the opportunity to improve the book. We have expanded on the
changing role of management accountants to enable them to retain their place at the centre
of the decision-making and planning process. In Chapter 1, we have included the recently
developed statement of Global Management Accounting Principles. These principles have
been identified (by the leading management accounting professional bodies in the UK and US)
as those to be followed when determining the information that managers need. In Chapter 7,
we have brought in a discussion of current thinking and practice in the area of management
control. Throughout this new edition, we have included additional, and more up-to-date, exam-
ples of management accounting in practice. We have also added more in-chapter questions
and diagrams.
This text is supported by its own MyLab Accounting which is an environment that gives
unlimited opportunities for practice using a range of questions, and which provides timely
feedback. Updates to MyLab Accounting for the 10th edition include the enhancement of
over 45 previously static questions so that these are now algorithmic, which means that each
student is able to work on a numerical problem that is individual to him or her. In addition to
the Case Studies, useful self-study suggestions in the Study Plan, and vast range of exercises
(over 940) to select from, better feedback has been incorporated in MyLab Accounting for
this edition, providing a greater quality of response to help students learn from their incorrect
answers and make progress in their learning.
For access to MyLab Accounting, students need both a course ID and an access card (see
the advert on the inside back cover of the book).
Peter Atrill
Eddie McLaney
xviii PREFACE

How to use this book
Whether you are using the book as part of a lecture/tutorial-based course or as the basis for a
more independent mode of study, the same approach should be broadly followed.
Order of dealing with the material

The contents of the book have been ordered in what is meant to be a logical sequence. For
this reason, it is suggested that you work through the book in the order in which it is presented.
Every effort has been made to ensure that earlier chapters do not refer to concepts or terms
which are not explained until a later chapter. If you work through the chapters in the ‘wrong’
order, you may encounter points that have been explained in an earlier chapter which you
have not read.
Working through the chapters

You are advised to work through the chapters from start to finish, but not necessarily in one
sitting. Activities are interspersed within the text. These are meant to be like the sort of ques-
tions which a good lecturer will throw at students during a lecture or tutorial. Activities seek
to serve two purposes:
■ To give you the opportunity to check that you understand what has been covered so far.
■ To try to encourage you to think beyond the topic that you have just covered, sometimes
so that you can see a link between that topic and others with which you are already familiar.
Sometimes, activities are used as a means of linking the topic just covered to the next one.
You are strongly advised to work through all the activities. Answers are provided immediately
after each activity. These answers should be covered up until you have arrived at a solution,
which should then be compared with the suggested answer provided.
Towards the end of Chapters 2–12, there is a ‘self-assessment question’. This is rather
more demanding and comprehensive than any of the activities. It is intended to give you an
opportunity to see whether you understand the main body of material covered in the chapter.
The solutions to the self-assessment questions are provided in Appendix B at the end of the
book. As with the activities, it is very important to make a thorough attempt at the question
before referring to the solution. If you have real difficulty with a self-assessment question you
should go over the chapter again, since it should be the case that careful study of the chapter
will enable completion of the self-assessment question.
End-of-chapter assessment material

At the end of each chapter there are four ‘critical review questions’. These are short ques-
tions that require you to analyse a topic dicussed in the chapter and to form a judgement. In
providing that answer you will need to apply some critical thinking skills (see ‘Note to students
HOW TO USE THIS BOOK xix

from the authors’ in the Preface). The questions attempt to raise many of the key issues in the
chapter concerned. Suggested answers to these questions are provided in Appendix C at the
end of the book. Again, a serious attempt should be made to answer these questions before
referring to the suggested answers.
At the end of each chapter, there are normally eight exercises. These are more demanding
and extensive questions, mostly computational, and should further reinforce your knowledge
and understanding. We have attempted to provide questions of varying complexity.
Answers to five out of the eight exercises in each chapter are provided in Appendix D at the
end of the book. These exercises are marked with a coloured number, but a thorough attempt
should be made to answer these questions before referring to the answers. Answers to the
three exercises that are not marked with a coloured number are given in a separate teacher’s
manual.
xx HOW TO USE THIS BOOK

Acknowledgements
The publisher thanks the following reviewers for their very valuable comments on the book:
Martyn Jones, University of Winchester

Ed Tew at the University of Reading
Christos Begkos, University of Manchester
Anis Zras, University of Southampton
Mohamed Fadzly, University of Birmingham
Jatin Pancholi, Middlesex University
ACKNOWLEDGEMENTS xxi

Chapter 1
INTRODUCTION TO
MANAGEMENT
ACCOUNTING
INTRODUCTION
Welcome to the world of management accounting! Management
accounting is concerned with collecting and analysing financial and other
information and then communicating this to managers. This information
is intended to help managers within businesses and other organisations
make better decisions. In this introductory chapter, we examine the role of
management accounting within a business. To understand the context for
management accounting, we begin by examining the nature and purpose
of a business. Thus, we first consider what businesses seek to achieve,
how they are organised and how they are managed. Having done this, we
go on to explore how management accounting information can be used
within a business to improve the quality of managers’ decisions. We also
identify the characteristics that management accounting information must
possess to fulfil its role. Management accounting has undergone significant
advances in response to changes in the business environment and to the
increasing size and complexity of business entities. In this chapter we shall
discuss some of the more important changes that have occurred.
Learning outcomes
When you have completed this chapter, you should be able to:
■ identify the purpose of a business and discuss the ways in which a
business may be organised and managed;
■ discuss the issues to be considered when setting the long-term direction
of a business;
■ explain the role of management accounting within a business and
describe the key principles upon which management accounting rests;
and
■ explain the changes that have occurred over time in both the role of
the management accountant and the kind of information provided by
management accounting systems.
M01 Management Accounting for Decision Makers 49459.indd 1 23/09/2020 16:31

WHAT IS THE PURPOSE OF A BUSINESS?
Peter Drucker, an eminent management thinker, has argued that ‘The purpose of business is
to create and keep a customer’ (see Reference 1 at the end of the chapter). Drucker defined
the purpose of a business in this way in 1967, at a time when most businesses did not adopt
this strong customer focus. His view therefore represented a radical challenge to the accepted
view of what businesses do. Now, more than 50 years later, his approach forms part of the
conventional wisdom. It is now widely accepted that, in order to succeed, businesses must
focus on satisfying the needs of the customer.
Although the customer has always provided the main source of revenue for a business, this
has often been taken for granted. In the past, too many businesses assumed that the customer
would readily accept whatever services or products were on offer. When competition was weak
and customers were passive, businesses could operate under this assumption and still make a
profit. However, the era of weak competition has passed. Today, customers have much greater
choice and are much more assertive concerning their needs. They now demand higher quality
services and goods at cheaper prices. They also require that services and goods be delivered
faster with an increasing emphasis on the product being tailored to their individual require-
ments. If a business cannot meet these criteria, a competitor often can. Thus, the business
mantra for the current era is ‘the customer is king’. Most businesses now recognise this fact
and organise themselves accordingly.
Real World 1.1 describes how the Internet and social media have given added weight to
this mantra. It points out that dissatisfied customers now have a powerful medium for broad-
casting their complaints.
Real World 1.1
The customer is king

The mantra that the ‘customer is king’ has gained even greater significance among busi-
nesses in recent years because of the rise of the Internet and social media. In the past, a
dissatisfied customer might tell only a few friends about a bad buying experience. As a result,
the damage to the reputation of the business concerned would normally be fairly limited.
However, nowadays, through the magic of the Internet, several hundred people, or more,
can be very speedily informed of the poor service.
Businesses are understandably concerned about the potential of the Internet to damage
reputations, but are their concerns justified? Do customer complaints, which wing their way
through cyberspace, have any real effect on the businesses concerned? A Harris Poll survey
of 2,000 adults in the UK and US suggests they do and so businesses should be concerned.
It seems that social media can exert a big influence on customer buying decisions.
The Harris Poll survey, which was conducted online, found that around 20 per cent of
those surveyed use social media when making buying decisions. For those in the 18 to 34
age range, the figure rises to almost 40 per cent. Furthermore, 60 per cent of those surveyed
indicated that they would avoid buying from a business that receives poor customer reviews
for its products or services.
The moral of this tale appears to be that, in this Internet age, businesses must work even
harder to keep their customers happy if they are to survive and prosper.
Source: Based on information in Miesbach, A. (2015) Yes, the Customer Is Still King, 30 October, www.icmi.com
2 CHAPTER 1 INTRODUCTION TO MANAGEMENT ACCOUNTING

HOW ARE BUSINESSES ORGANISED?
Nearly all businesses that involve more than a few owners and/or employees are set up as
limited companies. Finance will come from the owners (shareholders) both in the form of a
direct cash investment to buy shares (in the ownership of the business) and through the share-
holders allowing past profits, which belong to them, to be reinvested in the business. Finance
will also come from lenders (banks, for example) as well as through suppliers providing goods
and services on credit.
In larger limited companies, the owners (shareholders) tend not to be involved in the daily
running of the business; instead they appoint a board of directors to manage the business on
their behalf. The board is charged with three major tasks:
■ setting the overall direction for the business;

■ monitoring and controlling the activities of the business; and
■ communicating with shareholders and others connected with the business.
Each board has a chairman who is elected by the directors. The chairman is responsible
for the smooth running of the board. In addition, each board has a chief executive officer
(CEO) who leads the team that is responsible for running the business on a day-to-day
basis. Occasionally, the roles of chairman and CEO are combined, although it is usually
considered to be good practice to separate them. It prevents a single individual having
excessive power.
The board of directors represents the most senior level of management. Below this level,
managers are employed, with each manager being given responsibility for a particular part of
the business’s operations.
Activity 1.1
Why doesn’t just one manager manage larger businesses as a single unit? Try to think of
at least one reason.
Three common reasons are:
■ The sheer volume of activity or number of employees makes it impossible for one person
to manage them.
■ Certain business operations may require specialised knowledge or expertise.
■ Geographical remoteness of part of the business operations may make it more practical
to manage each location as a separate part, or set of separate parts.
The operations of a business may be divided for management purposes in different ways.
For smaller businesses offering a single product or service, separate departments are often
created. Tasks are grouped according to functions (such as marketing, human resources and
finance) with each department responsible for a particular function. The managers of each
department will then be accountable to the board of directors. In some cases, a departmental
manager may also be a board member. A typical departmental structure, organised along
functional lines, is shown in Figure 1.1.
HOW ARE BUSINESSES ORGANISED? 3

Board of directors
Human
Finance Marketing Operations
resources
This is a typical departmental structure organised according to business functions.
Figure 1.1 A departmental structure organised according to business functions
Departments based around functions permit greater specialisation, which, in turn, can pro-
mote greater efficiency. The departmental structure, however, can become too rigid. This can
lead to poor communication between departments and, perhaps, a lack of responsiveness to
changing market conditions.
The structure set out in Figure 1.1 may be adapted according to the particular needs of
the business. Where, for example, a business has few employees, the human resources func-
tion may not form a separate department but rather form part of another department. Where
business operations are specialised, separate departments may be created to deal with each
specialist area. Example 1.1 illustrates how Figure 1.1 may be modified to meet the needs of
a particular business.
Example 1.1
Supercoach Ltd owns a small fleet of coaches that it hires out with drivers for private group
travel. The business employs about 60 people. It could be departmentalised as follows:
■ Marketing department, dealing with advertising, answering enquiries from potential

customers, maintaining good relationships with existing customers and entering into
contracts with customers.
■ Routing and human resources department, responsible for the coach drivers’ routes,
schedules, staff duties and rotas as well as problems that arise during a particular job
or contract.
■ Coach maintenance department, looking after repair and maintenance of the coaches,
buying spares, and giving advice on the need to replace old or inefficient coaches.
■ Finance department, responsible for managing cash flows, costing business activities,
pricing new proposals, measuring financial performance, preparing budgets, borrowing,
paying wages and salaries, billing and collecting amounts due from customers, and
processing and paying invoices from suppliers.
For large businesses with a diverse geographical spread and/or a wide product range, the
simple departmental structure set out in Figure 1.1 will usually have to be adapted. Separate
divisions are often created for each geographical area and/or major product group. Each
division will be managed separately and will usually enjoy a degree of autonomy. This can
produce more agile responses to changing market conditions. Within each division, however,

departments are often created and organised along functional lines. Those functions that
provide support across the various divisions, such as human resources, may be carried out
at head office to avoid duplication. The managers of each division will be accountable to the
board of directors. In some cases, individual board members may also be divisional managers.
A typical divisional organisational structure is set out in Figure 1.2. Here the main basis of
the structure is geographical. Thus, North Division deals with production and sales in the north
and so on.
Board of directors
North South East West

Division Division Division Division
Finance Finance Finance Finance
Operations Operations Operations Operations
Marketing Marketing Marketing Marketing
Other Other Other Other
This is a typical organisational structure for a business that has been divided into separate
operating divisions.
Figure 1.2 A divisional organisational structure
Once a particular divisional structure has been established, it need not be permanent.
Successful businesses constantly strive to improve their operational efficiency. This could well
result in revising their divisional structure. Real World 1.2 includes an extract from a press
release that describes how one well-known business restructured in order to simplify opera-
tions and to reduce costs.
Real World 1.2
Engineering change
Rolls-Royce plc, the engineering business, announced in 2018 that it would simplify its busi-
ness operations. This involved consolidating its five operating divisions into three core units
based around Civil Aerospace, Defence and Power Systems.
Chief Executive Warren East justified the restructuring of the business as follows:
Building on our actions over the past two years, this further simplification of our business means
Rolls-Royce will be tightly focused into three operating businesses, enabling us to act with much
➔
HOW ARE BUSINESSES ORGANISED? 5

greater pace in meeting the vital power needs of our customers. It will create a Defence operation
with greater scale in the market, enabling us to offer our customers a more integrated range of
products and services. It will also strengthen our ability to innovate in core technologies and ena-
ble us to take advantage of future opportunities in areas such as electrification and digitalisation.
The business made the restructuring announcement not long after reporting a massive
pre-tax loss of £4.6 billion. It is expected that the move towards a simpler structure will
generate significant cost savings.
Source: Extract from Roll-Royce (2018) Rolls-Royce announces further simplification of business, strategic review of
Commercial Marine operation and plans to restructure support and management functions, Rolls-Royce.com Press
Release, 17 January.
While both divisional and departmental structures are very popular in practice, it should be
noted that other organisational structures will be found.
HOW ARE BUSINESSES MANAGED?
Over the past three decades, the environment in which businesses operate has become
increasingly turbulent and competitive. Various reasons have been identified to explain these
changes, including:
■ the increasing sophistication of customers (as we have seen);

■ the development of a global economy where national frontiers have become less important;
■ rapid changes in technology;
■ the deregulation of domestic markets (for example, electricity, water and gas);
■ increasing pressure from owners (shareholders) for competitive economic returns; and
■ the increasing volatility of financial markets.
The effect of these environmental changes has been to make the role of managers more
complex and demanding. This, along with the increasing size of many businesses, has led
managers to search for new ways to manage their businesses. One important tool that has
been developed in response to managers’ needs is strategic management. This is concerned
with establishing the long-term direction for the business. It involves setting long-term goals
and then ensuring that they are implemented effectively. To help the business develop a
competitive edge, strategic management focuses on doing things differently rather than simply
doing things better.
Strategic management provides a business with a clear sense of purpose along with a
series of steps to achieve that purpose. The steps taken should link the internal resources
of the business to the external environment of competitors, suppliers, customers and so
on. This should be done in such a way that any business strengths, such as having a skilled
workforce, are exploited and any weaknesses, such as being short of investment finance,
are not exposed. To achieve this requires the development of strategies and plans that take
account of the business’s strengths and weaknesses, as well as the opportunities offered
and threats posed by the external environment. Access to a new, expanding market is an
example of an opportunity; the decision of a major competitor to reduce prices is an example
of a threat.
Real World 1.3 provides an indication of the extent to which strategic planning is carried
out in practice.

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his power, 266;
his theory of internal politics, 272;
contradictions in his character, 277;
his hopefulness, 307 et seq.;
as a man of science, 310;
his dislike for New Englanders, 310 et seq.;
his letter to Paine, 316;
attacked by Callender, 322;
sensitiveness of, 324;
his relations with Callender, 325 et seq.;
sends Lear to St. Domingo, 389;
ignorant of Bonaparte’s schemes, 403 et seq.;
his eyes opened, 409;
his letter to Dupont de Nemours, 410;
writes to Livingston defining his position with respect to
France and Spain, 424;
his annual message, 1802, 427;
ignores the war party, 428;
replies to their demand for papers touching the right of deposit
at New Orleans, 430;
quiets the West, 432;
attempts the purchase of New Orleans, 432 et seq.;
his language to Thornton, 436;
prefers Natchez to New Orleans as a seat of trade, 443;
his apparent inconsistency, 443 et seq.;
the essence of his statesmanship, 445;
proposes alliance with England, ii. 1, 78;
instructs Pinckney to offer a consideration to Spain for New
Orleans and Florida, 22;
writes a defence of his use of patronage for the Boston
“Chronicle,” 82;
his amendment to the Constitution regarding Louisiana, 83;
his letter to Breckenridge on the subject, 84;
to Paine, 86;
draws up a new amendment, 86;
his reply to W. C. Nicholas, 89;
his message, Oct. 7, 1803, 92;
his bill for the administration of Louisiana, 119;
his view of the Louisian treaty and legislation, 130;
requests Congress to enlarge the Mediterranean force, 140;
interview with Burr, 175;
declines to appoint Burr to an executive office, 176;
his knowledge of Federalist schemes, 192;
his confidence in his popularity, 202;
receives the electoral votes of Massachusetts and New
Hampshire, 204;
his message, November, 1804, 206;
his disappointment at the acquittal of Justice Chase, 243;
his authority in foreign affairs, 245;
desires to obtain West Florida, 245;
explains to Senator Breckenridge his course toward Spain,
248;
his plan to obtain West Florida, 249;
instructs Monroe with regard to the Spanish claims, 250;
the harvest season of his life, 252;
sends troops to Natchez, 254;
makes no demand for West Florida when Louisiana is
delivered, 256;
declares Mobile within the United States, 263;
entertains Yrujo at Monticello, 266;
his conviction of the power of American commercial interests,
330;
anxious for friendship with England, 342;
his intimacy with Thornton, 347;
his opinion of Bonaparte, 347, 353, 381;
decides to maintain the neutral rights of the United States
more strictly, 356;
his social habits, 363;
establishes a new social code, 365;
receives Merry, 366;
invites him to dinner with Pichon, 369;
sends list of impressments to the Senate, 384;
improves his style of dress, 405;
his enemies, 409.
Judiciary Act, the, i. 274 et seq.;
repeal of, moved, 278 et seq., 284 et seq.;
repealed, 298.
Judiciary system, the, Jefferson’s recommendations concerning,
i. 255.
Kentucky in 1800, i. 2, 43;

Resolutions of 1798, 140 et seq., 205.
Key, Philip Barton, ii. 228.
King, Rufus, American minister in London, i. 109;
sends the treaty of the retrocession of Louisiana to Jefferson,
409; ii. 23, 178 et seq.;
obtains from Pitt a definition of neutral importation, 328, 340;
his negotiations with the British government, 345, 347;
returns with favorable conventions, 358;
opinion of F. J. Jackson and Anthony Merry, 361;
leaves England, 410.
Langdon, John, i. 220.

Latrobe, Benjamin H., report on steam-engines, i. 68, 70, 112;
letter of, to Volney, 130.
Laussat, prefect in Louisiana, ii. 5;
arrives at New Orleans, 10, 13;
defines the boundaries of the Louisiana purchase, 255;
declares the Rio Bravo the western limit of Louisiana, 298.
Lea, Thomas, i. 257.
Lear, Tobias, consul to St. Domingo, i. 389;
quits St. Domingo, 407;
negotiates a treaty with the Pacha of Tripoli, ii. 434.
Leclerc, General, in command of the expedition against
Louverture, i. 378;
seizes Toussaint Louverture, 396;
insults American shipmasters, 407;
reports French losses, 414;
blamed by Napoleon, 416;
his death, 418; ii. 13.
Lee, Charles, ii. 228.
Leib, Michael, member of Congress from Pennsylvania, i. 298;
ii. 123, 194, 196 et seq.
Lewis, Morgan, i. 108.
Lewis, William, i. 127.
Liancourt, Duc de, describes Philadelphia, i. 28, 117;
on the Virginians, 33;
on life in Pennsylvania, 42, 45, 52;
on Virginia culture, 133, 157, 165.
Libraries, i. 61, 63, 129, 152.
Lincoln, Abraham, i. 171.
Lincoln, Levi, Attorney-General, i. 219, 304; ii. 2;
on the acquisition of new territory by the United States, 78.
Linn, James, member of Congress from New Jersey, i. 295.
Linn, John Blair, i. 123.
Liston, Robert, British minister, ii. 340, 367.
Literature, American, in 1800, i. 41, 75 et seq., 93.
Livingston, Edward, district-attorney and mayor of New York, i.
233, 295; ii. 259.
Livingston, Robert R., Chancellor, i. 69, 108, 112, 219;
appointed minister to France, 233, 295, 404;
discusses the price of Louisiana, ii. 31;
his claims convention, 46;
his estimate of the importance of the cession of Louisiana, 67;
claims West Florida, 68 et seq.;
his plan of gaining West Florida, 246, 275;
his situation after the treaty, 289;
distrusts Napoleon, 290.
Logan’s Act, ii. 259.
Longstreet, Judge, author of “Georgia Scenes,” i. 52.
Louisiana, loss of, regretted by France, i. 353;
retrocession by Spain to France, 363;
Talleyrand’s projet of treaty, 368;
treaty of retrocession signed, 370;
Bonaparte plans an expedition to occupy, 399;
boundaries fixed by Decrès, ii. 5;
commercial relations and sentiments prescribed toward the
United States, 8;
treaty of cession to the United States signed, 42;
price of, 45;
importance of cession, 49;
Napoleon’s reasons for selling, 53;
Talleyrand’s explanation of, 55;
treble invalidity of sale, 56;
Constitutional question debated in Congress, 96 et seq.;
plans with regard to the status of, 116;
admitted without an amendment, 118;
bill for temporary government of, 120;
Breckenridge’s bill defining boundaries and government, 120
et seq.;
bill defining territorial government of, 125, 130;
Spain protests against sale of, 252 et seq.;
people regarded as unfit for self-government, 399;
they urge the execution of the treaty, 400;
report of Randolph upon their claims, 400.
“Louisianacide,” Napoleon’s, ii. 37.
Louverture, Toussaint, i. 354;
story of, 378 et seq.;
champion of Republican principles, 392;
seized and sent to France, 396;
his dependence on the United States for supplies, 406, 416;
his death, ii. 20.
Lowndes, William, i. 151.
Luisa, Queen of Spain, i. 345 et seq.
Lyman, Theodore, ii. 169.
Lyon, Matthew, member of Congress from Vermont, i. 295;
from Kentucky, his attack on Randolph, ii. 123, 216.
McKean, Thomas, Governor of Pennsylvania, i. 228;

declines to remove Judge Brackenridge, ii. 196, 259.
Maclay, William, senator from Pennsylvania, his description of
Jefferson, i. 185.
Macon, Nathaniel, of North Carolina, i. 149, 261;
chosen Speaker of the House, 267; ii. 95, 123;
opposed to the impeachment of Judge Chase, 150.
Madison, Bishop, of Virginia, i. 136.
Madison, James, and the Virginia Resolutions, i. 140 et seq.,
148, 177;
personal characteristics of, 188 et seq.;
appointed Secretary of State, 218;
makes no removals in the Department of State, 236;
distrust of, 248, 261;
a commissioner in the Yazoo sale, 304, 322, 332;
instructions of, respecting the retrocession of Louisiana, 405;
asks Pichon to remonstrate with Leclerc, 408;
writes to Livingston, 423, 426;
his orders to Pinckney, 427, 432;
invokes Pichon’s aid, 438, 439, 441;
writes instructions for Livingston and Monroe, ii. 2;
conversation with J. Q. Adams respecting the Louisiana
treaty, 117;
favors Yazoo compromise, 211;
instructs Monroe to bargain with Spain for West Florida, 248,
251;
explains the failure to demand West Florida, 256;
sends the ratified claims convention to Madrid, 260, 278, 279;
hopes to be relieved of Yrujo, 267;
communicates with Livingston respecting West Florida and
Yrujo, 262;
attempts to cajole Turreau, 273;
Turreau’s description of him, 274;
compromised by Pinckney, 276;
recalls Pinckney and hurries Monroe to Spain, 286;
denies that the Government aids desertion of seamen, 345;
communications to Thornton, 362;
proposes a convention with regard to impressments and the
blockade, 385;
remonstrates with Merry respecting impressments, 393.
Mail routes in 1800, i. 15.
Maine, convention for fixing the boundary between, and Nova
Scotia, ii. 358, 383.
Maitland, General, at St. Domingo, i. 385.
Malbone, Edward G., i. 149.
Manhattan Company of New York city, i. 65, 70.
Manners and morals, American, in 1800, i. 48 et seq.
Manufactures in New England in 1800, i. 22.
Marbois, Barbé, favors the cession of Louisiana, ii. 26.
Marbury against Madison, case of, ii. 145 et seq.
Marietta, Ohio, in 1800, i. 2.
Marshall, Chief-Justice, i. 133;
Jefferson’s antipathy to, 192;
personal characteristics of, 193;
detests Jefferson, 194;
his views of the Constitution, 260, 275, 290;
opinion of, respecting the powers of Government in the
Louisiana case, ii. 125;
appointment of, obnoxious to Jefferson, 145;
his decision in the Marbury case, 146;
his decision in the Yazoo case, 214.
Martin, Luther, his view of impeachment, ii. 223, 227, 231.
Mason, George, i. 133.
Massachusetts society in 1800, i. 76.
Meade, Bishop, of Virginia, i. 193.
Mediterranean Fund, the, ii. 141.
Merry, Anthony, appointed British minister to the United States,
ii. 360;
his arrival and reception by Jefferson, 361 et seq., 380, 381,
390;
dines at the White House, 369;
considers himself affronted and declines the President’s
invitations, 375;
union of, with Burr, 390;
writes to his Government, 392;
remonstrates with Madison respecting the enlistment of
deserters, 393;
receives a message from Burr, 395;
communicates Burr’s plan to his Government, 403.
“Messenger,” stallion, i. 51.
Milledge, Governor, and the Yazoo sale, i. 305.
Mint, opposition to, i. 299; ii. 77.
Mississippi, district of, created, ii. 257.
Mitchill, Dr. Samuel L., i. 69, 93, 110; ii. 153, 218, 238.
Mobile treated as a part of the United States, ii. 255, 257, 260–
263, 291, 293, 304, 380.
“Modern Chivalry,” i. 125.
Monroe, James, and the Callender scandal, i. 325;
nominated minister extraordinary to France and Spain, 433;
his instructions, 442;
sails for France, ii. 1;
his arrival in France, 26;
illness of, in Paris, 39;
his draft of claims convention, 41;
his share in the negotiation, 50;
under the influence of other men, 67;
commissioned to negotiate with Spain for West Florida, 248;
takes Rufus King’s place in London, 275, 288, 410;
his distrust of Livingston, 289;
returns to Paris, 292, 301;
is instructed to insist upon the right to West Florida, 301;
writes to Talleyrand, 304;
starts for Madrid, 307, 422;
receives answer from Talleyrand, 313;
in ignorance of Pitt’s schemes, 419;
interview with Lord Harrowby, 420;
warns the President to expect a change in British policy, 422.
Moore, Thomas, i. 48;
lines of, on the Philadelphia literati, 122;
his verses on Jefferson, 167.
Morfontaine, treaty of, i. 362, 370, 388; ii. 21, 42, 46, 47, 293,
296, 297, 383.
(See Treaties.)
Morocco, ii. 137.
Morris, Commodore, dismissed, ii. 137.
Morris, Gouverneur, i. 93, 279;
assails the Government, 435; ii. 99, 101, 283.
Morse, Jedediah, i. 78, 93.
Napoleon, i. 334;
and Talleyrand, 359;
restores peace in Europe, 360;
obtains retrocession of Louisiana, 363–370;
his anger with Godoy, 373–375;
makes peace with England, 374;
attacks Louverture, 390;
fears a war with the United States, ii. 2;
abandons his colonial system, 14 et seq.;
scene with Lord Whitworth, 19;
reveals his determination to cede Louisiana, 25;
angry scene with his brothers, 34 et seq.;
his projet of a secret convention respecting Louisiana, 40;
objects to the payment of claims, 51;
his inducement to sell Louisiana, 52;
his conduct toward Spain, 56;
his avowal as to the sale of Louisiana, 61;
his reasons for betraying Charles IV., 63;
for selling Louisiana, 63 et seq.;
repudiates drafts on the public Treasury, 270;
his irritation at Jerome’s marriage, 379.
Nash, Thomas, ii. 333.
Natchez delivered to the United States, i. 355.
“National Intelligencer,” i. 121.
Naturalization law adopted, i. 301.
Naturalization, the law of, in England and America, ii. 337 et
seq.
Navigation laws, British, ii. 318, 321, 413.
Navy, Jefferson’s opinion of, i. 222, 223, 238;
Gallatin’s views on, 222, 240, 252;
Giles’s views on, 287;
Leib’s proposal to abolish, 299;
condition in 1801, 242–245;
economies in, 272;
four sloops-of-war and fifteen gunboats built in 1803, ii. 77;
cost and estimates, 77, 136;
at Tripoli, 137–141, 425–436.
Nelson, Roger, ii. 229.
New England in 1800, i. 18;
school-houses, 19;
population, 20;
poverty, 21;
commerce and manufactures, 21 et seq.;
social system, 76;
schools, 76;
society, organization of, 108.
New Haven, i. 75.
Newspapers, American, in 1800, i. 41, 120.
New York city in 1800, tax valuation of, i. 23;
behind New England, 23;
population, 24;
like a foreign seaport, 24;
expenses and sanitary condition, 25;
business, 25 et seq.;
society of, 113.
New York State in 1800, i. 3, 6, 23, 108–114.
Nicholas, Wilson Cary, i. 221;
dissuades the President from raising Constitutional question,
ii. 88, 94, 111, 221.
Nicholson, Joseph H., i. 261, 268, 433; ii. 95, 100, 124, 144;
and the attack upon Judge Chase, 149, 225, 228;
offers an amendment to the Constitution, 240.
North Carolina in 1800, i. 36;
cotton planting, 37, 148.
Offices, Jefferson’s removals from, i. 230 et seq.

Ohio, admitted, i. 302.
Ohio River settlements in 1800, i. 2.
Ohio, Territory of, ii. 121.
Olcott, Simeon, senator from New Hampshire, ii. 160.
Orleans, Territory of, ii. 121.
Osgood, Samuel, i. 108.
Otis, Harrison Gray, ii. 163.
Paine, Robert Treat, i. 330.
Paine, Thomas, Jefferson’s letter to, i. 316, 327.
“Palladium,” the, i. 314.
Parker, Admiral, ii. 340.
Parliament. (See Acts of.)
Parma, Duchy of, i. 363, 371.
Parsons, Chief-Justice Theophilus, i. 48, 87, 89, 93; ii. 164.
Party, the Federalist, in New England, i. 76, 82–89, 329; ii. 160,
170, 202;
in New York, i. 109; ii. 171, 191;
views on government, i. 252;
on the Judiciary, 273–275, 279, 290, 297;
on the treaty-making power, ii. 99–100, 105, 110, 111.
Party, the Republican, in New England, i. 76, 329, 330; ii. 81,
201, 202;
in New York, i. 108, 109, 113, 229–236, 331; ii. 171–191;
in Pennsylvania, i. 116, 194–200;
in Virginia, 138–143, 145–148, 179;
in North Carolina, 148;
in South Carolina, 152–154;
political principles of, 199–217, 238–243, 247, 251, 272, 287;
ii. 77, 78, 130, 134, 142, 203, 205, 254–262;
leaders of, in Congress, i. 264–269;
views of, on the Judiciary, 275, 276, 288–290, 297; ii. 143–
159, 221–244;
on the treaty-making power, 78–80, 83–91, 94–99, 100–104,
106–112;
on the power of Congress over territories, 116–129;
on exclusive privileges, 208–210;
on British relations, 349, 355, 356;
success in 1803, 74–77;
in 1804, 201.
Patronage, public, Jefferson’s course regarding, i. 224, 294.
Patterson, Elizabeth, ii. 377.
Paulus Hook, i. 11.
Peace, Prince of. (See Godoy.)
Pêle-Mêle, ii. 365, 372, 390.
Pellew, Captain, of the “Cleopatra,” ii. 340.
Pennsylvania in 1800, i. 29, 114, 115;
schism, the, ii. 194 et seq.
Perkins, Jacob, i. 182.
Philadelphia in 1800, i. 28, 29;
library company, 61;
intellectual centre in 1800, 117.
“Philadelphia,” the frigate, captured, ii. 138.
Physick, Dr., i. 127.
Pichon, French chargé d’affaires, remonstrates with Leclerc and
is superseded, i. 408; ii. 268;
complains to Talleyrand of the attitude of the United States,
437, 439;
observes Jefferson’s close relations with Thornton, 354;
invited by Jefferson to meet Merry at dinner, 369.
Pickering, Judge John, impeachment of, ii. 143 et seq.;
trial of, 153 et seq.;
irregularity of trial, 158.
Pickering, Senator Timothy, i. 88;
and Yrujo, 425;
on the admission of Louisiana to the Union, ii. 105, 110 et
seq., 160;
his letter to George Cabot on the impending dangers, 161,
164;
receives Cabot’s reply, 166 et seq.;
letter of, to Rufus King on Burr’s candidacy for the
governorship, 179, 390, 391.
Pinckney, Charles, i. 152;
appointed minister to Madrid, 294, 427;
obtains a convention for Spanish depredations, ii. 249 et seq.;
indiscretions of, at Madrid, 275;
compromises Madison, 276;
adopts a high tone with Cevallos, 279;
sends him a threatening letter, 280;
excuse for his conduct, 281;
in an awkward situation, 284;
his recall asked for, 286;
asks the Spanish government to be permitted to resume
relations, 315.
Pitt, William, ii. 316, 320, 324, 326, 328, 330, 336, 342;
restored to power, 396, 418;
determined to re-establish the former navigation laws, 419.
Pittsburgh in 1800, i. 2.
Plumer, William, senator from New Hampshire, ii. 160, 364, 405.
“Polly,” case of the, ii. 328, 340.
Population of the United States in 1800, i. 1;
centre of, near Baltimore, 1;
west of the Alleghanies in 1800, 3;
of cities, 59.
“Portfolio,” the, i. 85, 119, 121.
Postal system of the United States in 1800, i. 61.
Pozzo di Borgo, ii. 66.
Preble, Commodore Edward, appointed in command of the
Mediterranean squadron, ii. 137;
at Tripoli, 426.
Prevost, J. B., ii. 220.
Priestley, Dr. Joseph, i. 157.
Prince of Peace. (See Godoy.)
Princeton College in 1800, i. 129.
Prisons in 1800, i. 128.
Ramsay, David, i. 151.

Randolph, John, i. 143, 209;
in favor of anti-Federal declarations, 260, 267, 296, 338;
demands papers relating to the right of deposit at New
Orleans, 429; ii. 95;
defends the President in Congress, 97, 120, 124, 133, 142,
144;
impeaches Judge Chase, 151;
opposes remission of duties on school-books, 208;
decline of his influence, 210;
on the Yazoo claims, 210;
his violent temper, 213;
supported by the Administration, 220;
opens the trial of Judge Chase, 229;
his closing speech, 236;
his amendment to the Constitution, 240, 241;
asserts title to West Florida, 255;
complains of Jefferson’s credulity, 409.
Randolph, Thomas Mann, ii. 95, 124.
Rawle, William, i. 127; ii. 259.
Reeve, Judge Tapping, ii. 168.
Representation, ratio of Congressional, fixed, i. 301.
Republicans. (See Party.)
Retaliation acts, ii. 397 et seq.
Rhode Island, roads in, i. 64.
Rigaud, i. 384, 386.
Roads in 1800, i. 2, 5, 11 et seq., 14, 63, 64;
over the Alleghanies in 1800, 2.
Robbins, Jonathan, case of, ii. 333.
Rochambeau, General, succeeds Leclerc at St. Domingo, ii. 15.
Rodgers, John, at Tripoli, ii. 429.
Rodney, Cæsar A., elected to Congress in place of James A.
Bayard, ii. 76, 95;
a Republican leader, 100;
defends the Louisiana treaty, 102;
reports Jefferson’s bill for administering Louisiana, 119;
shares in the trial of Judge Chase, 219, 228, 234.
Rose, George, vice-president of the board of trade, ii. 419.
Roume, Citizen, French agent in St. Domingo, i. 384, 387.
Rule of the war of 1756, ii. 322, 323, 329.
Rutledge, John, i. 269, 271.
Sailors, British, their desertion to American service, ii. 332 et

seq.
St. Cyr, General, pledges France never to alienate Louisiana, i.
400; ii. 61.
St. Domingo ceded to France, i. 354, 378 et seq.;
destruction of the French army in, 414;
relations of United States to, ii. 326.
Saratoga, i. 92.
Sauvé, Pierre, ii. 401, 406.
Scott, Dred, case of, ii. 126, 129.
Scott, Walter, i. 126.
Scott, Sir William, his judgments in admiralty cases, ii. 327.
Schuylers of New York, the, i. 108.
Search, right of, ii. 322.
Senate, as a court of impeachment, ii. 223.
Sheffield, Earl of, his devotion to the British navigation laws, ii.
413.
Shippers, British, ii. 318, 320.
Shipping, character of, in 1800, i. 6;
American, increase of, ii. 325.
Sidmouth, Lord. (See Addington.)
Silliman, Professor Benjamin, i. 310.
Skipwith, Fulwar, U. S. consul, attacks Livingston, ii. 289.
Slave-trade, restrictions of, in Louisiana, ii. 122.
Slavery, i. 134–136, 150, 154.
Smith, Senator Israel, of Vermont, ii. 218.
Smith, John Cotton, i. 269.
Smith, Senator John, of New York, ii. 153.
Smith, Senator John, of Ohio, ii. 218.
Smith, Robert, appointed Secretary of the Navy, i. 220 et seq.,
373, 431.
Smith, Samuel, member of Congress from Maryland, appointed
temporarily Secretary of the Navy, i. 219;
his character, 267;
moves to purchase Louisiana, 433;
his vote on Chase’s impeachment, ii. 238;
his wish to be minister to Paris, 378.
Smiths, the, of Baltimore, i. 93.
Somers, Lieutenant, at Tripoli, ii. 427.
South Carolina in 1800, i. 37;
brilliant prospects of, 39, 149 et seq.;
contrast in the character of its people, 153 et seq.
Spain, relations of, with the United States, i. 337 et seq.;
clumsiness of her colonial system, 419;
declares war with England, ii. 303.
Spanish claims convention, ii. 249;
defeated in the Senate, 250;
ratified, 278;
conditions on ratification imposed by Spain, 280.
Spanish depredations claim. (See Pinckney.)
Spencer, Ambrose, i. 109, 112, 228, 233.
Stage-coaches, travel by, i. 11 et seq.
State-rights, asserted by Virginia, i. 138–140;
by Kentucky, 140–143;
by Georgia, 304; ii. 215;
affected by Jefferson’s acts, i. 203, 205, 254, 255, 260, 263,
298; ii. 78, 85, 90, 114, 118, 125, 130, 203, 205, 210;
Gallatin’s attitude toward, i. 116; ii. 79, 80;
Bayard on, i. 292;
Randolph on, ii. 97, 98, 104, 120, 209, 211;
Nicholson on, 102, 209;
Rodney on, 103, 119;
Pickering on, 105;
John Taylor of Caroline on, 105–107;
Breckenridge on, 109, 121;
W. C. Nicholas on, 111–113;
Chief-Justice Taney on, 127;
Justice Campbell on, 127–129.
Steam-engines in America in 1800, i. 66, 68, 70.
Stevens, Edward, consul-general at St. Domingo, i. 385 et seq.,
389.
Stevens, John, i. 69, 182.
Stewart, Charles, at Tripoli, ii. 428.
Stoddert, Benjamin, i. 192, 219.
Story, Joseph, his description of Fulton’s discouragements, i. 71;
of Marshall, 193, 260;
of Jefferson’s dress, ii. 366.
Stone, Senator David, of North Carolina, ii. 95, 157.
Stowell, Lord. (See Sir William Scott.)
Stuart, Gilbert, i. 127.
Sugar, stimulated production of, and subsequent glut in the
West Indies, ii. 415.
Supreme Court, the, i. 274;
sessions suspended for a year by Congress, ii. 143.
Sutcliffe, Robert, i. 34.
Swartwout, John, i. 109, 230;
his duel with De Witt Clinton, 332.
Talleyrand, i. 335;
his colonial schemes, 352 et seq.;
becomes French minister of foreign affairs, 353;
his negotiations with the American commissioners, 355;
his instructions for Guillemardet, 355;
his mistakes, 357;
obliged by the X. Y. Z. affair to retire, 358;
restored by Bonaparte, 359, 412;
his letter with regard to Louisiana, 400;
denies the retrocession of Louisiana, 409;
his instructions to Bernadotte, ii. 11;
opposes the cession of Louisiana, 25;
proposes it to Livingston, 27;
explanation of the sale of Louisiana, 55;
assures Cevallos of Napoleon’s opposition to the American
claims, 293;
his instructions to Turreau, 295;
reassures Cevallos, 297;
his attitude toward the United States, 309;
report to the Emperor on Monroe’s note, 310;
answer to Monroe, 313.
Taney, Chief-Justice, opinion of, respecting governmental
powers in the Louisiana case, ii. 126, 128.
Taxes, abolition of, i. 240, 270, 272.
Taylor, John, of Caroline, i. 143, 146, 263, 338; ii. 94;
his remarks on the Louisiana purchase, 105.
Taylor, Judge, ii. 177.
Temperance in United States in 1800, i. 47.
Tennessee, population of, in 1800, i. 2.
Terry, Eli, i. 181.
Texas, a part of the Louisiana purchase, ii. 256.
Theatre in New England in 1800, i. 49.
Theatres in Boston, i. 90.
Thompson, Smith, i. 108.
Thornton, Edward, his description of the inauguration of
Jefferson, i. 198, 436, 440;
letter to Hammond, ii. 342, 388;
complains that desertion of seamen is encouraged, 345;
Jefferson’s confidential relations with, 347;
proposals with regard to Monroe’s mission, 351;
on change on tone in 1804, 387, 388.
Thornton, Dr. William, i. 111.
Ticknor, George, i. 63, 94.
Tracy, Senator Uriah, of Connecticut, his reply to John Taylor of
Caroline, ii. 107, 238.
Travel in America, difficulties of, in 1800, i. 11 et seq.
Treaty, preliminary between Great Britain, France, and Spain,
Nov. 3, 1762, i. 353; ii. 7, 70;
definitive between the same, Feb. 10, 1763, i. 353; ii. 6;
definitive between Great Britain and Spain, Sept. 3, 1783, i.
353;
definitive between the United States and Great Britain, Sept.
3, 1783, ii. 90, 411;
Jay’s, between the United States and Great Britain, Nov. 19,
1794, i. 348; ii. 316, 334, 339, 355, 421, 424;
of Basle, between Spain and France, July 22, 1795, i. 354;
Pinckney’s, between the United States and Spain, Oct. 27,
1795, 348, 349; ii. 246;
between Toussaint and Maitland, June 13, 1799, i. 385;
of Morfontaine, between the United States and France, Sept.
30, 1800, 362, 388; ii. 21, 42, 46, 47, 293, 296, 297, 383;
Berthier’s, between Spain and France, retroceding Louisiana,
Oct. 1, 1800, i. 370, 401, 403; ii. 43, 58, 70, 254;
of Lunéville between France and Austria, Feb. 9, 1801, i. 370;
of Lucien Bonaparte between Spain and France, March 21,
1801, 372, 406, 409; ii. 299;
of Badajos between Spain and Portugal, June 5, 1801, i. 372;
preliminary, between Great Britain and France, Oct. 1, 1801,
374; ii. 344;
settling British debts between Great Britain and the United
States, Jan. 8. 1802, 358, 410;
of Amiens between Great Britain and France, March 25, 1802,
59, 290, 326, 347, 385, 414, 416;
of claims between the United States and Spain, Aug. 11,
1802, 21, 250, 259, 278, 280, 293, 296, 297, 383;
between France and the United States, ceding Louisiana and
settling claims, 39–49, 51, 67, 85, 88, 92, 97, 100, 102,
105, 107, 108, 111, 245, 275, 289, 302, 308, 355, 399–
401;
between the United States and Great Britain for settling
boundaries, May 12, 1803, 358, 383, 384, 391, 392, 410,
420, 424;
between the United States and Tripoli, Nov. 4, 1796, i. 244;
June 4, 1805, ii. 434, 436.
Treaty-making power, defined by W. C. Nicholas, ii. 87, 88, 112;
by Jefferson, 89, 90;
by Gaylord Griswold, 96, 97;
by Randolph, 98, 99;
by Gouverneur Morris, 100;
by Nicholson, 101;
by Rodney, 102, 103;
by Pickering, 105;
by John Taylor of Caroline, 106, 107;
by Tracy, 108;
by Breckenridge, 109;
by J. Q. Adams, 111;
by Cocke, 113;
summary of opinions on, 114, 115.
Tripoli, the war with, ii. 137, 426 et seq.;
Pacha of, 430;
peace with, 436.
Trumbull, John, i. 101.
Turnpikes, prejudice against, i. 64 et seq.
Turreau, Louis Marie, appointed minister to the United States by
Napoleon, ii. 268;
his domestic quarrels, 269;
complains of the discredit of France, 271;
embarrassments of, 272;
his description of Madison, 274;
receives instructions from Talleyrand, 296;
presented to Jefferson, 405;
describes General Wilkinson, 406.
Unitarians in New England, i. 89.

United States, banking capital of, in 1800, i. 26;
credit and trade of, 27;
monetary valuation of, in 1800, and distribution of wealth, 40;
popular characteristics of the people of, in 1800, 41 et seq.;
standard of comfort, 42.
Urquijo, Don Mariano Luis de, i. 355, 365, 368.
Utica in 1800, i. 3.
Van Ness, William P., i. 109;

author of pamphlet by “Aristides,” ii. 73, 171;
carries Burr’s demand to Hamilton, 186.
Vanderbilt, Cornelius, i. 28.
Varnum, Joseph B., member of Congress from Massachusetts,
ii. 123.
Victor, Marshal, to command the forces in Louisiana, ii. 5.
Vincent, Colonel, i. 382.
Virginia in 1800, i. 32;
farming in, 33, 131 et seq.;
horse-racing, 51;
Washington’s views on the value of land in, 135;
Church and State in, 136;
adoption of the Constitution by, 139;
Resolutions, 140 et seq.;
law to prevent extradition, ii. 334, 345, 398.
Virginians, i. 133 et seq.;
of the middle and lower classes, 137;

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Management Accounting for Decision

Makers 10th Edition Atrill

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We combine innovative learning technology with trusted

From classroom to boardroom, our curriculum materials, digital

Every day our work helps learning flourish, and

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First published 1995 by Prentice Hall Europe (print)

ISBN: 978-1-292-34945-9 (print)

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1 Introduction to management accounting 1

Appendix A Glossary of key terms 513

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1 Introduction to management accounting 1

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5 Costing and cost management in a

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7 Accounting for control 243

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9 Managing risk 333

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10 Strategic management accounting: performance

F01 Management Accounting for Decision Makers 49459.indd 13 23/09/2020 17:05

12 Managing working capital 459

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Appendix A Glossary of key terms 513

Lecturer Resources ON THE

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A note to students from the authors

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A note to lecturers and tutors from the authors

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Order of dealing with the material

Working through the chapters

End-of-chapter assessment material

HOW TO USE THIS BOOK xix

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xx HOW TO USE THIS BOOK

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Martyn Jones, University of Winchester

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Real World 1.1

The customer is king

2 CHAPTER 1 INTRODUCTION TO MANAGEMENT ACCOUNTING

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■ setting the overall direction for the business;

Three common reasons are:

HOW ARE BUSINESSES ORGANISED? 3

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This is a typical departmental structure organised according to business functions.

Figure 1.1 A departmental structure organised according to business functions

■ Marketing department, dealing with advertising, answering enquiries from potential

4 CHAPTER 1 INTRODUCTION TO MANAGEMENT ACCOUNTING

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North South East West

Finance Finance Finance Finance

Operations Operations Operations Operations

Marketing Marketing Marketing Marketing