Ma Chapter 1 Notes

CHAPTER 1: THE ACCOUNTANT'S ROLE IN THE ORGANIZATION

MAJOR PURPOSE OF ACCOUNTING SYSTEMS

➢ Take economic events and transactions and present the information to help decision makers

➢ Note that different users (managers) will require different information

TERMINOLOGY

➢ MANAGEMENT ACCOUNTING

• focuses on internal reporting, both financial and non financial, not so constrained by GAAP, forward looking

• assists in communicating, implementing strategies, coordinating product design, production and marketing

➢ FINANCIAL ACCOUNTING

• focuses on external reporting

• records business transactions and provides (historical) financial statements according to GAAP

➢ COST ACCOUNTING

• provides info related to purchase and use of resources for both financial and management accounting

➢ COST MANAGEMENT

• active use of accounting info to plan and control costs, while maintaining customer satisfaction

• an important component of cost management is to recognize that prior decisions commit the organization to future costs

MODERN MANAGEMENT ACCOUNTING

➢ The primary users/customers of management accounting information are the organization's managers

➢ The management accountant's success is a function of whether the accounting information s/he provides improves a manager's decision(s)

STRATEGIC DECISIONS AND THE MANAGEMENT ACCOUNTANT

DEVELOPING STRATEGY

➢ How, as an organization, do we compete in our industry? What are our strengths and weaknesses?

➢ How do we match our strengths with the opportunities in the marketplace?

➢ How do we differentiate ourselves from our competitors?

• focus on low prices? e.g. Superstore, Walmart

• unique products/services with higher prices? e.g. luxury cars

➢ Management accountants assist managers in their decisions by answering such questions as:

• who are our most important customers?

• how...