Management Accounting

• Management accounting measures and reports

financial and non-financial information that helps
managers make decisions to fulfill the goals of an
organization
• Managers use management accounting information to
• choose, communicate and implement strategy
• coordinate product design, production and
marketing decisions
• Management accounting focuses on internal reporting
• Management accounting is future oriented

Copyright © 2003 Pearson Education Canada Inc. Pages 2-3 Slide 1-1
Financial Accounting

• Financial accounting measures and records business

transactions and provides financial statements that
are based on generally accepted accounting
principles (GAAP)
• Managers are responsible for the financial statements
issued to investors, government regulators, and other
parties outside the organization
• Financial accounting focuses on external parties
• Financial accounting reports on what happened in the
past

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Cost Accounting and Cost Management

• Cost accounting measures and reports information

relating to the cost of acquiring and utilizing
resources
• Cost accounting provides information for
management and financial accounting
• Cost management describes the approaches and
activities of managers in short-run and long-run
planning and control decisions
• These decisions increase value of customers and
lower costs of products and services
• Cost management is an integral part of a company’s
strategy

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Management Accountants and Strategy
• Strategy specifies how an organization matches its
own capabilities with opportunities in the marketplace
to accomplish its objectives
• Strategy examples
• Quality products or services at low prices (WestJet)
• Unique products or services at higher prices
(Clublink)
• Management accountants provide information to
management such as
• Who are our customers and suppliers
• Sensitivity of market to price, quality and service
• Industry characteristics (size, growth)

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 Planning and Control
Management Management
Decisions Accounting System

PLANNING Budgets Financial

• increase advertising • pages sold, rates per representation
rates page, revenue of plans
Feedback

CONTROL
Action Accounting System Recording
• implement rate • invoices / receipts transactions
increase recorded in ledger in accounts

Performance Performance
Evaluation Comparing
Reports
• comparison of actual • pages sold, rate per budgeted and
and budgeted revenues page, revenue actual results

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Key Management Accounting Guidelines

Cost-Benefit Approach
• spend resources if they promote decision making
that better attains the organization’s goals in relation
to the cost of these resources
Behavioural and Technical Considerations
• systems are not confined exclusively to technical
matters
• always consider the influences of human activity

Different Costs for Different Purposes

• define”cost” depending on the situation under
consideration

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Functions of Management Accounting
• Management accountants perform three functions

Scorekeeping
• accumulate data and report reliable results to all
levels of management

Attention-directing
• make visible opportunities and problems on
which managers need to focus
Problem-solving
• conduct comparative analysis to identify the best
alternatives in relation to the organization’s goals

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Four Themes of Value Enhancement

1. Customer Focus
• attract and retain profitable customers

2. Value-chain and supply-chain analysis

• manage these critical functions

3. Key success factors (KSFs)

• keep attention focused on critical factors relative
to our competitors

4. Continuous improvement and benchmarking

• never-ending search for higher levels of
performance
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Key Themes in Management Decision Making

Customer
Focus

Value-Chain Key Success Factors Continuous

and • Cost and Efficiency Improvement
Supply-Chain • Quality And
Analysis • Time Benchmarking
• Innovation

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The Value Chain
• Sequence of business functions in which utility
(usefulness) is added to the products or services of
an organization
• Management accounting helps managers to
administer each of these business functions

Product,
Research Customer
Service
and Production Marketing Distribution Service
Process
Development
Design

Management Accounting
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