1.

2.

The Manager and Management

Accounting

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3.

Distinguish financial accounting from

management accounting
Understand how management accountants
help firms make strategic decisions
Describe the set of business functions in
the value chain and identify the dimensions
of performance that customers are
expecting of companies

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4.

5.

6.

7.

Explain the five-step decision-making

process and its role in management
accounting
Describe three guidelines management
accountants follow in supporting managers
Understand how management accounting
fits into an organizations structure
Understand what professional ethics mean
to management accountants

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Management accountingmeasures,

analyzes, and reports financial and

nonfinancial information to help managers
make decisions to fulfill organizational goals.
Management accounting need not be GAAP
compliant.

Financial accountingfocuses on

reporting to
external users including investors, creditors,
banks, suppliers, and governmental agencies.
Financial statements must be based on GAAP.
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Cost

accounting measures, analyzes and

reports financial and nonfinancial
information related to the costs of acquiring
or using resources in an organization.

Today, most

accounting professionals take

the position that cost information is part of
management accounting; therefore, the
distinction between the two is not clear-cut
and in this book, we often use the terms
interchangeably.
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Strategy

specifies how an organization matches

its own capabilities with the opportunities in
the marketplace.
There are two broad strategies: cost
leadership or product differentiation

Strategic cost managementdescribes cost
management that specifically focuses on
strategic issues.

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Management accounting helps answer important

questions such as:
Who are our most important customers, and how can
we be competitive and deliver value to them?
 What substitute products exist in the marketplace,
and how do they differ from our own?
 What is our most critical capability?
 Will adequate cash be available to fund the strategy
or will additional funds need to be raised?


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Creating value

is an important part of
planning and implementing strategy.

Value is the usefulness a customer gains from
a companys product or service. The entire
customer experience determines the value a
customer derives from a product.

The

Value chain is the sequence of

business functions in which a product is
made progressively more useful to
customers.

The Value chain consists of:
1.
2.
3.
4.
5.
6.

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Research & development

Design of Products and Processes
Production
Marketing
Distribution
Customer service
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Production

and Distribution are the parts of

the value chain associated with producing
and delivering a product or service.

These two functions together are known as
the Supply-Chain

The supply chain describes the flow of goods,
services and information from the initial
sources of materials, services, and
information to their delivery regardless of
whether the activities occur in one
organization or in multiple organizations.

Customers want

companies to use the value

chain and supply chain to deliver everimproving levels of performance when it
comes to several (or even all) of the
following:
Cost and efficiency
Quality
 Time
 Innovation
 Sustainability



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Planning selects goals

and strategies,
predicts results, decides how to attain goals,
and communicates this to the organization.

1.
2.
3.
4.

5.

Identify the problem and uncertainties.

Obtain information.
Make predictions about the future.
Make decisions by choosing between
alternatives.
Implement the decision, evaluate
performance, and learn.
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Budgetthe most important planning tool-is the

quantitative expression of a plan of activity by
management and is an aid to coordinating what
needs to be done to execute that plan.

Control

takes actions that implement the

planning decision, evaluates performance,
and provides feedback and learning to the
organization.
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Three guidelines help management accountants provide

the most value to the strategic and operational
decision- making of their companies:

Costbenefit approach: benefits of an
action/purchase generally must exceed costs as a
basic decision rule.

Behavioral and technical considerations: people are
involved in decisions, not just dollars and cents.

Different Costs for Different Purposes: Managers use
alternative ways to compute costs in different
decision-making situations.
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The

four standards of ethical conduct for

management accountants as advanced by the
Institute of Management Accountants are:
Competence
Confidentiality
 Integrity
 Objectivity



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The Sarbanes-Oxley legislation was passed in

2002 in response to a series of corporate
scandals. The act focuses on improving:
1. Internal controls
2. Corporate governance
3. Monitoring of managers
4. Disclosure practices of public companies

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TERMS to LEARN

Page Number Reference

TERMS to LEARN

Page Number Reference

Budget

Page 11

Design of products and processes

Page 6

Chief Financial Officer

Page 14

Distribution

Page 6

Control

Page 11

Finance Director

Page 14

Controller

Page 14

Financial Accounting

Page 3

Cost Accounting

Page 4

Learning

Page 12

Cost-Benefit approach

Page 12

Line Management

Page 14

Cost Management

Page 4

Management Accounting

Page 4

Customer Relationship
Management (CRM)

Page 7

Marketing

Page 6

Planning

Page 11

Customer Service

Page 6

Production

Page 6

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TERMS to LEARN

Page Number Reference

Research & Development (R&D)

Page 6

Staff Management

Page 14

Strategic Cost Management

Page 5

Strategy

Page 5

Supply Chain

Page 7

Sustainability

Page 8

Total Quality Management (TQM)

Page 8

Value Chain

Page 8

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