Week 5 - An Introduction to Management Accounting I

Question 1

Define management

Answer 1

The entire range of activities involved in running an organisation, regardless of its nature

Question 2

Define accounting

Answer 2

Activities to gauge the performance of an organisation, or to plan for an organisation’s future performance. It also includes stewardship, control and audit

Question 3

What does Drury say management accounting is concerned with?

Answer 3

‘The provision of information to people within the organisation to help them make better decisions and improve the efficiency and effectiveness of existing operations’

Question 4

What does an information system do?

Answer 4

Produces the information required by managers to manage resources and create value

Question 5

What does an information system include?

Answer 5

• regular estimates of the cost of goods and services
• information for planning and controlling operations
• information for measuring performance

Question 6

What kind of information is management accounting information?

Answer 6

Ad-hoc (to satisfy managers’ short and long-term decision making needs) and future oriented

Question 7

How does the planning and control cycle work?

Answer 7

• formulating long and short-term plans (planning)
• implementing the plans (directing and motivating)
• measuring performance (controlling)
• comparing actual to planned performance (controlling)
  Then cycle starts again

Question 8

How does management accounting service the information needs of managers?

Answer 8

• developing plans and analysing alternatives
• COMMUNICATING plans to key personnel
• evaluating performance
• reporting the results of activities
• accumulating, maintaining and processing an organisation’s financial and non-financial information