Chapter 1 Flashcards
Explain
Objective 1: Understand the major differences between management accounting and financial accounting
- Management accounting is both prospective and retrospective. It is retrospective in a way that it gives feedback of the results of the past transactions. It is prospective in a way that it gives estimate and forecast of future actions.
Financial accounting is only retrospective because it only summarizes and reports results of past transactions and events ( ex. debit ,credit in a ledger
- Management accounting is oriented to managers and employees while Financial accounting is oriented to shareholders, investors, regulators, tax authorities
- Management accounting does not follow any rule or format. It just depends on the informational needs of the manager while Financial accounting follows the format or rules prescribed by the IASB for international and FASB in USA.
- Financial Accounting gives financial info only while management accounting gives both financial and non financial info.
- Management Accounting info depends on relevance while Financial accounting info depends on reliability
- Financial Accounting reports periodically while Management Accounting can report anytime
- Financial Accounting involves external users only while Management accounting involves both external and internal users.
Explain
Objective 2: Appreciate the historical evolution of management accounting and its current set of processes
Early 19th century
Management Accounting is used to compute the costs of making a simple product such as clothes and weapon.
As enterprises become complex, the demand for a more accurate costing info increases.
Mid 19th century
Railroad managers used a large complex system to compute the cost of different freights.
They were the first modern industry to use statistics to measure and evaluate performance.
Late 19th century
Andrew Carnergie, in his steel company, recorded a detailed cost system to measure costs.
He read and acted upon this information and use this to his advantage by closing some mills that were inefficient. He lowered his price to prices that no competitors could match.
20th century
Dupont and General Motors shifted the focus of management accounting from cost management to management planning.
In summary, the innovations in management accounting is constantly driven by the informational needs of the managers as companies become more complex, technology advances and competitors increases.
Explain
Objective 3: Define Management Accounting
Management Accounting is the process of giving relevant information, financial and nonfinancial , to managers and employees that will be used for decision making, allocating resources, and performance evaluation.
Management Accounting ,accdg to IMA, is a profession that involves partnering in management :
- decision making
- devising planning
- performance management system
to develop and implement a strategy.
What are some examples of financial and non financial info?
Financial info
- cost of producing a product
-cost of delivering a service
- cost of doing a process
Nonfinancial info
- employee motivation
- delivery time and quality of products/services
-customer satisfaction and loyalty
-innovation
Explain
Objective 5: Understand the steps of the PDCA cycle and how each each step has a role in management information.
PDCA Cycle is proposed by W. Edward Demings, who is a quality management expert.
Plan: Identify your objectives
Choose a course of action to achieve strategy
Do: Implement the chosen course of action
Check : Monitor and evaluate the results of the chosen course of action
Compare the results from the expected results in the planning stage
Act: Accept course of action if the results are acceptable, if not, go back to planning stage
Explain
Objective 4: Understand the role of management accounting in strategical and operational decision making
Strategy is composed of the company’s what to do and what not to do.
An organization needs a strategy that best fit its culture to achieve objectives.
Once a strategy has been selected, org needs management accounting info to implement strategy, allocate resources, communicate strategy and link processes and employees to achieve strategy.
once strategy gets done, management acctng info provides feedback on where it is working and where it is not.
Explain
Objective 5: Be sensitive to the behavioral implications of employee that results from the intro of new management and measurement system
Hawthorne effect
It is a systematic and recursive way to develop , implement, monitor and evaluate a course of action
PDCA cycle
This step of PDCA defines org purpose and selects the scope and focus of the strategy
Plan
What is management?
Management is the process of planning, controlling and organizing tasks to achieve goals of org.
Whats the difference between Line position and staff position?
Line position- directly responsible for achieving org goals, downward authority
example: laging hinahanap ng tao, involves in day to day operation, related sa production
bagger, president of production
Staff position- provides service or advice to line managers, upward authority
example: acctng. manager, chief financial officer
What are the 4 standards for management accountant ?
competence, integrity, confidentiality and objectivity
The check step in the PDCA cycle includes 2 components , what are those components?
measuring and monitoring performance
taking short term actions based on the measured performance
true or False
information for the Plan and Do in PDCA cycle includes cost, profit, efficiency and quality to come up with alternative ways to produce a good or services
True
True or False
Information for the
“check” and “act” steps includes assessments of how well the organization is
achieving its objectives
True
