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Chapter 1 1
 Contents

‡ Accounting, accountability and the account

‡ Accounting history
‡ Two types of accounting
‡ Management accounting vs. Financial accounting
‡ Role of management accounting
‡ Recent developments in management accounting

Chapter 1 2
 Accounting, Accountability and the Account (1)

h


0 A process capturing business event, recording,

summarizing and reporting the financial effects, and
interpreting their results

0 Predominantly concerned with economic information -

financial and non-financial

0 Supporting stakeholders in their judgements and

decision-making activities; stakeholders being those
having an interest in the survival, profitability, and
growth of the business

Chapter 1 3
 Accounting, Accountability and the Account (2)

°  

 

0 Scorekeeping: capturing, recording, summarizing and

reporting financial performance

0 Attention-directing: drawing the attention of managers

to the interpretation of the business performance,
particularly in terms of comparing actual with planned
performance

0 Problem-solving: identifying the best choice from a

range of alternative actions

Chapter 1 4
 Accounting History

a   

 

 

  
 
0 First book on accounting
 
   
0 Separation of ownership from management
0 Exercising control over managers by absent owners
0 Decentralisation & divisionalisation
0 Financial accounting & management accounting


   
0 rrowth of service industries

Chapter 1 5
 Two types of Accounting

°

 a  

   a 

0 Accountability in financial 0 Provides financial an non-

statements for
stakeholders
0 Provides an explanation or
report in financial terms
about the transactions of
an organisation
financial information for
developing strategy and
long-term planning
0 Make decisions about
products, services, prices
and what costs to incur

0 Ensures that plans are put

into action and are
achieved (control)

Chapter 1 6
 Management Accounting vs. Financial Accounting

°


  

  


a   External: Stockholders« Internal: Executives«

  Past performance Current decisions

   Delayed, historical Future oriented

  Regulated (government) None, operational needs

  

 Financial measures Fin. + Op. measures


  

 Objective Judgmental

 Highly aggregate Disaggregate

Chapter 1 7
 Role of Management Accounting

The role of management accounting is:

0 To provide timely and accurate information, to

control costs, to measure and improve productivity
of processes, and to optimize the use of resources

0 To report accurate product costs to facilitate pricing

decisions, and to select profitable product- and
market segments

Chapter 1 8
 Recent Developments in Management Accounting

Limitations of traditional management accounting has led to

an emphasis of new concepts:

0 Value based management

0 Non-financial performance indicators
0 Quality management (TQM«)
0 Environmental accounting (energy; pollution)
0 Activity-based management
0 Strategic management accounting
0 Lean accounting

Chapter 1 9
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Chapter 1 10