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Accounting (Subject) / Introduction (Lesson)

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• Definition of Management Accounting Management Accounting is a profession that involves - partnering in management decision making, - devising planning and performance management systems, - and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy
• What does Cost Management mean? = Development and use of cost management information:- information, manager needs to implement the strategy of the form - financial information (costs, revenue) and non-financial information (customer satisfaction, quality, sustainability)- information, the cost manager uses to maximize economic value - Responsible person in the CEO (delegates much of his responsibility to the controller)
• How will competitive strategies for firms change when using the internet to distribute transactions? Why do firms go online from a cost management perspective? - Scalability: Reach more customers through one point of scale. No longer need to retail store (Transaction processing) -> save on retail shop costs and have lower inventory - Production scheduling: On demand. Easier to manage cost accounting online, save internal transaction costs. - Recruitment: Lower recruitment costs, first application stage generally online nowadays - Respond to customer shopping behavior: More customers are shopping online. To compete with rival firms that are also online receive revienue, there must be an online point of scale - Location of the production can be anywhere, as long as it can be shipped to customer
• Information value chain Stage 1: Business events Stage 2: Gather and summariz data from business event Stage 3: Transform data into accounting information through analysis and use of accountants expertise Stage 4: Accounting information combined with other information about strategy and competitive environment Stage 5: Decision by management teams assisted by management accountants
• Accounting information needed for major management functions 1) Strategic management- identifiying and implementing goals and action plans to maintain a sustainable competitive position - Strategic decisions with respect to: choice of product, manufacturing methods, merketing techniques and distribution channels, customer profitability 2) Planning and decision making- support recurring decisions such as repairing and replacing equipemt, managing cash flows, scheduling produciton-pricing 3) Management and operational control- Operational control: mid-level managers monitor activities of operating-level managers and employees- Management control: evaluation of mid-level managers by top-level management- Cost information needed to identify inefficient operations and to reward and motivate most effective managers 4) Preperation of financial statements- provide accurate accounting for inventory and other assets- in compliance with regulatory reporting requirments
• How do changes in business environment affect cost management? 1) Shift to a global business environment- economic interdependence and increased competition - increased need of information on a global basis 2) Lean manufacturing- Just-in-time inventory methods, inventory reduction, flexible manufacturing systems- Emphasis on speed-to-market 3) Importance of Information technology- use of internet has reduced processing time, increased acces to information 4) Focus on customer- consumers expect functionality, quality and innovation- shorter product life cycle -> intensified competition- cost management reprts now include measures of customer preference and satisfaction 5) Shifts in managemenr organization - from financial & profit-based to customer-based measures- from hierarchical command-& control organization to flexible organizational structures 6) Social, political and cultural considerations- more diverse workforce, changes in regulatory requirements and renewed sense of ethical responsibility
• Management accountant's response to changes in business environment Focus in Strategy implementation:1. The balanced scorecard and strategy map2. The value chain 3. Activity based costing and management4. Business intelligence5. Target costing6. Life cycle costing Focus in process improvement:7. Benchmarking8. Business process improvement9. Total quality management10. Th theory of constraints11. Lean accounting12. Sustainability13. Enterprise risk management
• The five steps of strategic decision making 1. Determine strategic issues surrounding the problem 2. Identify alternative actions 3. Obtain information and conduct analyses of alternatives 4. Based on strategy and analysis, choose and implement desired alternative 5. Provide an on-going evaluation of effectiveness of implementation in Step 4.

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