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Management Accounting Basic Framework

Management Accounting Basic Framework. Group 1 Anna, Al, Shimmy, Stephanie Period 7. Introduction: Managerial Accounting . Use of accounting info to achieve company objectives Assess decision performance Three principles: Decides who has authority over company assets

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Management Accounting Basic Framework

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  1. Management AccountingBasic Framework Group 1 Anna, Al, Shimmy, Stephanie Period 7

  2. Introduction: Managerial Accounting • Use of accounting info to achieve company objectives • Assess decision performance • Three principles: • Decides who has authority over company assets • Accounting info created in order to support planning and decision making • Provides a mean of monitoring, evaluating, and rewarding performance

  3. Management’s Accounting Role in Assigning Decision-Making Authority • Each manager has his own authority and responsibilities. • Assigned to specific assets Ex. Plant Manager • Their responsibilities are outlined • Job description • Verbal instruction • Documents and reports • Receive reports outlining expected outcomes

  4. Management’s Accounting Role in Decision-Making • Reliable and timely information • Ex: historic information, efficiency of equipment, projected information. • Value chain • Require information from internal operations and external sources. • Organization share information and participate in bench mark studies • Collecting information from companies in same industry • Compare cost and processes • Share information with customers and suppliers within the value chain. • Suppliers- production • Consumers- quality of product

  5. Management Accounting’s Role in Performance Evaluation and Rewards Product Costs and the Matching Principle • Assets which managers have decision making authority do not belong to the managers. • Corporation • Corporations monitor outcome of decision made by the managers to make sure assets are earning a good return. • When corporation is owned by shareholders • External financial statements • Parallel monitoring system serve similar functions inside corporations. • Plant level income statements • Accounting system must be designed to fulfill all three roles.

  6. Actual Results:Current PerformanceEvaluation: Past SupportDecision Making EvaluateDecision Making Management Accounting System Framework Top Management Budget Plans: Future AssignDecision Making

  7. Accounting Systems: A Business Partner • There are 5 demands placed on accounting information systems. • The 5 demands in both financial and management accounting are: Purpose, Types of Reports, Standards for Presentation, Reporting Entity, and Time Periods Covered. • Because of the rapidly evolving changes in technology and information, business managers study management accounting through their careers. Many companies require employees to complete training in a variety of accounting techniques. • Shareholders, creditors, and the IRS do not expect information as timely as the information needed by a plant manager.

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