1 -1

An
An electronic
electronic
presentation
presentation by
by
Douglas
Douglas Cloud
Cloud
Pepperdine
PepperdineUniversity
University
 1 -2

Differentiate Between
Management Accounting and
Financial Accounting
 1 -3
Management
ManagementAccounting
Accounting Financial
FinancialAccounting
Accounting

1. Internally focused 1. Externally focused

 1 -4

Targeted
Targeted Users
Users

Management
accounting
focuses on
providing
information for
internal users.
 1 -5

Targeted
Targeted Users
Users

Financial
Financial
accounting
accounting focuses
focuses
on
on providing
providing
information
information for
for
ABC external
external users.
users.
Company
Annual
Report
 1 -6
Management
ManagementAccounting
Accounting Financial
FinancialAccounting
Accounting

1. Internally focused 1. Externally focused

2. No mandatory rules 2. Must follow externally
imposed rules
 1 -7

Restrictions
Restrictions on
on Inputs
Inputs and
and Processes
Processes
Management
Financial
Management accounting
Financial accounting
accounting
accounting isis not
reportingnot subject
reporting must
subject
must
to
followto the
follow therequirements
the
the accounting of
of generally
accounting procedures
requirements set
generally
procedures set by
by
accepted
the
accepted accounting
the SEC and
and the principles.
the FASB.
accounting
SEC principles.
FASB.
 1 -8
Management
ManagementAccounting
Accounting Financial
FinancialAccounting
Accounting

1. Internally focused 1. Externally focused

2. No mandatory rules 2. Must follow externally
imposed rules
3. Financial and 3. Objective financial
nonfinancial informa- information
tion; subjective
information possible
 1 -9

Types of Information

For
ForThe
management
The restrictions
restrictionsaccounting,
management imposed
imposed on
accounting, onthe
the
financial
financial
financial
financialaccounting
or
or nonfinancial
accounting tend
tend to
nonfinancial to
produce
information
produce
informationobjective
may
may be
objective and
be much
and verifiable
much more
verifiable
more
financial
subjective
financial
subjectiveinformation.
in
in nature.
information.
nature.
 1 -10
Management
ManagementAccounting
Accounting Financial
FinancialAccounting
Accounting

1. Internally focused 1. Externally focused

2. No mandatory rules 2. Must follow externally
imposed rules
3. Financial and 3. Objective financial
nonfinancial informa- information
tion; subjective
information possible
4. Emphasis on the future 4. Historical orientation
 1 -11

Time
Time Orientation
Orientation

Management
accounting strongly
emphasizes providing
information about
future events.
 1 -12

Time
Time Orientation
Orientation

Financial
accounting records
and reports events
that have already
happened.
 1 -13
Management
ManagementAccounting
Accounting Financial
FinancialAccounting
Accounting

1. Internally focused 1. Externally focused

2. No mandatory rules 2. Must follow externally
imposed rules
3. Financial and 3. Objective financial
nonfinancial informa- information
tion; subjective
information possible
4. Emphasis on the future 4. Historical orientation
5. Internal evaluation and 5. Information about the
decisions based on very firm as a whole
detail information
 1 -14

Degree
Degree of
of Aggregation
Aggregation
Management
accounting provides
measures and internal
reports used the
evaluate performance of
entities, product lines,
departments, and
managers.
 1 -15

Degree
Degree of
of Aggregation
Aggregation

Financial
accounting focuses
on overall firm
performance.
 1 -16
Management
ManagementAccounting
Accounting Financial
FinancialAccounting
Accounting

1. Internally focused 1. Externally focused

2. No mandatory rules
3. Financial and
nonfinancial informa-
tion; subjective
information possible
4. Emphasis on the future
5. Internal evaluation and
decisions based on very
detail information
6. Broad, multidisciplinary
2. Must follow externally
imposed rules
3. Objective financial
information
4. Historical orientation
5. Information about the
firm as a whole
6. More self-contained
 1 -17

Breadth
Breadth
ItIt includes
includes aspects
aspects of
of managerial
managerial
Management
Management accounting
accounting isis much
much
economics,
economics, industrial
industrial engineering,
engineering,
broader
broader than
than financial
financial accounting.
accounting.
and management science.
and management science.
 1 -18

Current
Current Focus
Focus of
of Management
ManagementAccounting
Accounting
Activity-Based
Activity-Based Management
Management

Activity-based management is a system

wide, integrated approach that focuses
management’s attention on activities with the
objective of improving customer value and
the resulting profit.
 1 -19

Current
Current Focus
Focus of
of Management
ManagementAccounting
Accounting
Customer
Customer Orientation
Orientation

Customer value is the difference between

what the customer receives (customer
satisfaction) and what the customer gives up
(customer sacrifice).

What is received is called the total product.

 1 -20

Current
Current Focus
Focus of
of Management
ManagementAccounting
Accounting
Strategic
Strategic Positioning
Positioning

Strategic cost management is the use of cost data

to develop and identify superior strategies that
will produce a sustainable competitive advantage.
Strategies:
1) Cost leadership
2) Superior products through differentiation
 1 -21

Chapter One

The
The End
End
1 -22