1 / 11

Accounting for Decision Making and Control

Accounting for Decision Making and Control. Outline of Chapter 1 Introduction. Purposes of Managerial Accounting Planning/Decision Making Control Financial vs. Managerial Accounting Design of Accounting System Design and Use of Systems Evolution Example of Decision Making.

sheri
Télécharger la présentation

Accounting for Decision Making and Control

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Accounting for Decision Making and Control

  2. Outline of Chapter 1Introduction • Purposes of Managerial Accounting • Planning/Decision Making • Control • Financial vs. Managerial Accounting • Design of Accounting System • Design and Use of Systems • Evolution • Example of Decision Making

  3. Planning/Decision Making • Choosing goals, predicting results under various alternatives, making the decision • Examples: • Product Management: Add a new product, terminate an existing product line, accept/reject a special order • Pricing: Set selling price (profit or cash flow) • Cost control: Add equipment, change production process, make or buy (outsource)

  4. Control • Implementing the action • Evaluating the performance of personnel and operations • Goal: To ensure that the organization operates in the intended manner

  5. Objectives of Managerial Accounting • To provide information for decision making • To assist in controlling operations • To motivate employees toward achieving the organization’s goals • To measure the performance of employees or subunits of the organization

  6. Distinction Between Financial and Managerial Accounting • Financial Accounting • Used by shareholders, bondholders, taxing authorities, regulatory bodies, etc. • Rule-oriented, general purpose reports • Managerial Accounting • Used by managers - internal to firm • Focuses on the internal needs of managers (planning/decision making, performance evaluation)

  7. Design - Foundation • Economic perspective • Assumptions • Self-interested employees - maximize their own self-interest • Owners want to maximize firm value • Maximizing profits maximizes firm value • Goal: To design performance incentives based on accounting measures to motivate employees to take actions that maximize firm value

  8. Design - Conflicting Goals • Decision Making • Want to avoid distorted information • Desire estimates to plan future activities • Control • Need incentives to motivate behavior changes • Tendency to ignore information not specifically included in the system • Desire to report “good” numbers to satisfy top management

  9. Design - Evolution • Economic Darwinism • Over the long term, systems survive in competitive markets when the benefits exceed or equal the costs of maintaining those systems. • Survival does not imply optimality • Better systems may exist, but have not yet been discovered.

  10. Quote - p.11: Different Costs for Different Purposes • Points: • No single cost figure is superior to all others • All systems involve tradeoffs between decision making and control • Many decisions/choices are arbitrary - don’t be afraid to challenge/critique any systems that we’ve discussed.

  11. Vortec Example • Trade-off between decision management and decision control • Beware of unit costs • Use opportunity costs • Supplement accounting data with other information • Basing rewards on accounting information may be dangerous

More Related