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Chapter 1

Chapter 1. Major Differences Between Financial & Managerial Accounting. Strategy and Management Accounting. Strategy – specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives

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Chapter 1

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  1. Chapter 1

  2. Major Differences Between Financial & Managerial Accounting

  3. Strategy and Management Accounting • Strategy – specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives • Management Accounting provides information towards formulating, communicating and implementing strategy

  4. Strategy & Management Accounting • Management accounting helps answer important questions such as: • Who are our most important customers, and how do we deliver value to them? • What substitute products exist in the marketplace, and how do they differ from our own? • What is our critical capability? • Will we have enough cash to support our strategy or will we need to seek additional sources?

  5. Management Accounting and Value • Creating value is an important part of formulating and implementing strategy • Value is the usefulness a customer gains from a company’s product or service • Value Chain is the sequence of business functions in which customer usefulness is added to products or services

  6. Management Accounting and Value • The Value Chain: • Research and Development • Design • Production • Marketing • Distribution • Customer Service • Management accounting can provide information in each of these areas • Analysis can also include the supply chain

  7. Key Success Factors • The dimensions of performance that customers expect, and that are key to the success of a company include: • Cost and efficiency • Quality • Time • Innovation

  8. Formulating and Implementing Strategy Planning Controlling

  9. Planning & Control Systems • Planning selects goals, predicts results, decides how to attain goals, and communicates this to the organization • Budget – the most important planning tool • Control takes actions that implement the planning decision, decides how to evaluate performance, and provides feedback to the organization

  10. Management Accounting Guidelines • Cost – benefit approach is commonly used: benefits generally must exceed costs as a basic decision rule • Behavioral Considerations – people should be involved in decisions • Different definitions of cost may be used for different applications

  11. Line and Staff Relationships Line management is directly responsible for attaining the objectives of the organization. Staff management exists to provide advice and assistance to line management.

  12. Line and Staff Relationships

  13. Ethical Guidelines The Institute of Management Accountants (IMA) is the largest association of management accountants in the United States. The IMA has issued a Standards of Ethical Conduct for Management Accountant.

  14. IMA Code of Ethics for Management Accountants Four broad areas of responsibility: • Maintain a high level of professional competence • treat sensitive matters with confidentiality • Maintain personal integrity • Be objective in all disclosures

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