MA in an ET&A Environment, Blackboard Flashcards
What is management accounting in a new venture?
In a new venture management accounting helps founders develop a sustainable business model.
What is management accounting in established companies?
In established companies, management accounting helps managers develop and test new strategies, make operational decisions, and achieve strategic goals.
A business model is sustainable when…
It generates enough revenues and contributions to cover costs and to satisfy capital providers.
The purpose of management accounting is…
To help managers and entrepreneurs create and maintain a sustainable business model.
Financial accounting…
Provides financial information to external parties who rely on published financial statements as their primary source of information.
Managerial accounting…
Assists those inside the organization to create a business model and manage more effectively and efficiently.
What is the business golden rule for accountants?
The benefit from using information must exceed the cost of collecting and reporting it.
What activities does management accounting support?
Shaping ideas, strategy and business models
Analysis and decision making
Planning and coordinating
Performance management and control
Management accounting data is often…
Forward looking, less precise and tailored to fit managers and entrepreneurs’ needs.
Management accounting’s measurement scope…
Is increasing and changing over time. It includes both financial information (revenues, costs, cash flows and assets) and nonfinancial information (operational metrics about customers, processes, etc).
In response to a manufacturing manager responsible for the production cost, the management accountant would…
Provide the budgeted and actual material, labor and factory overhead costs.
What three attributes of information guide management accountants when selecting which measurement procedures to follow and what information to provide?
Technical, behavioral, and cultural.
What is the technical attribute?
This states that the information provided should enhance the manager’s understanding of business phenomena being studied.
What is the behavioral attribute?
This is the aspect that the information provided should encourage actions that are consistent with vision, mission and goals.
What is the cultural attribute?
This is when management accounting supports, reflects, and helps create a set of shared values, beliefs, and mindset in an organization culture.
What is organization culture?
Organizational culture guides the behavior of people at the subconscious level, and makes behaviors easier to sustain because people believe in them.
What is back cast?
Working backward from the minimum required performance results. Accountants create models of revenue, cost and assets that yield desired results. They delineate the things that would have to happen for those results to occur.
What are critical strategic assumptions within the back cast?
Which customer group will buy?
The distinguishing product characteristics (quality, cost, time) that provide value to the target customer group.
The price that target customers will pay.
The market size and % of market needed.
The costs incurred to produce, sell and serve customers.
What are drivers of performance?
A crucial element to understand if you do back casting. These are the factors that decision makers must target with specific action plans.
What does the Balanced Scorecard do?
A BSC translates lofty vision statements and strategic plans into action plans that can be understood and implemented.
What are the four elements of an action plan?
What will be done?
By whom?
When will it be done?
What resources are available?
What are lead measures?
Lead measures are measures of action plans that are supposed to generate desired outcomes. By monitoring them, decision makers can take corrective action before the wrong outcomes occur.
What are lag measures?
Lag measures, like return on assets, are measures of final desired outcomes. By monitoring these, decision makers can test if action plans result in desired outcomes.
What four perspectives does the BSC divide the company into?
Final perspective (measures financial consequences of action plans) Customer perspective (measures customer's perception of the company and its offerings) Internal business process perspective (identifies the business processes most important to providing customer value) Learning and growth perspective (establishes the capabilities that the organization needs to innovate and grow in the long run)
