Chapter 1 Introduction to management accounting

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Presentation transcript:

Chapter 1 Introduction to management accounting LEARNING OUTCOMES You should be able to: Identify the purpose of a business and discuss the ways in which a business may be organised and managed Discuss the issues to be considered when setting the financial aims and objectives of a business Explain the role of management accounting within a business and describe the key qualities that management accounting information should possess © Pearson Education Ltd. 2009 Explain the changes that have occurred over time in both the role of the management accountant and the type of information provided by management accounting systems

A department structure organised according to business functions Board of directors Finance Personnel Operations Marketing © Pearson Education Ltd. 2009

A divisional organisational structure Central services – Information technology, Personnel, Research and Development Board of directors North Division South Division East Division West Division Finance Marketing Operations Other © Pearson Education Ltd. 2009

The strategic management framework Perform review and control Select strategic options and formulate plans Identify and assess the strategic options Undertake a position analysis Establish mission and objectives © Pearson Education Ltd. 2009

Relationship between risk and return © Pearson Education Ltd. 2009

Main users of accounting information relating to a business Competitors Lenders Managers Suppliers Investment analysts Community representatives Government Employees and their representatives Customers Owners © Pearson Education Ltd. 2009

Quantity of information Relationship between costs and the value of providing additional management accounting information Value or costs (£) Quantity of information Costs Value Optimal quantity © Pearson Education Ltd. 2009

Characteristics that make management accounting information useful The characteristics that influence the usefulness of management accounting information Characteristics that make management accounting information useful Understandability Comparability Reliability Limitation to the application of the qualitative characteristics Cost/Benefit Necessary for including information in the financial statements Materiality Relevance © Pearson Education Ltd. 2009

The management accounting information system Information analysis Information identification Information reporting Information recording © Pearson Education Ltd. 2009

Management decisions requiring management accounting information Developing long-term plans and strategies Management accounting information Performance evaluation and control Determining costs and benefits Allocating resources © Pearson Education Ltd. 2009

Management and financial accounting Nature of the reports produced Level of detail Regulations Reporting interval Time horizon Range and quality of information The major differences concern: © Pearson Education Ltd. 2009