BKBM 5013 MANAGEMENT

ACCOUNTING FOR
MANAGERS
Topic 1: Introduction and Basic
Concept of Management
Accounting
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Strategy
A strategy
is a game plan
that enables a company
to attract customers
by distinguishing itself
from competitors.
The
The focal
focal point
point of
of aa
companys
companys strategy
strategy should
should
be
be its
its target
target customers.
customers.
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Organizational Structure
Decentralization
Decentralization is
is the
the delegation
delegation of
of decisiondecisionmaking
making authority
authority throughout
throughout an
an organization.
organization.

C o r p o r a te O r g a n iz a tio n C h a r t
B o a r d o f D ir e c to r s
P r e s id e n t
P u r c h a s in g

P e rs o n n e l

V ic e P r e s id e n t
O p e r a tio n s

C h ie f F in a n c ia l
O ffic e r

T re a s u re r
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C o n tr o lle r
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Line and Staff Relationships

Line positions are directly
related to achievement of
the basic objectives of an
organization.
Example: Production
supervisors in a
manufacturing plant.

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Staff positions support

and assist line positions.
Example: Cost
accountants in the
manufacturing plant.

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Process Management
A business
process is a series of
steps that are followed in order to
carry out some task in
a business.

R&D

Product
Design

Customer
Manufacturing Marketing Distribution Service

Business functions making up the value chain

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Process Management
There are three approaches to
improving business processes . . .

Theory of
Constraints (TOC)
Lean
Production

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Six
Sigma

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Management Accounting Information

What is management accounting?
A value-adding continuous improvement process
of planning, designing, measuring and operating
both nonfinancial information systems and
financial information systems that guides
management action, motivates behavior, and
supports and creates the cultural values
necessary to achieve an organizations strategic,
tactical and operating objectives ( based on IMA
definition)

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Management Accounting Information

Management accounting provides both
financial information and nonfinancial
information
The role of management information supports
strategic (planning), operational (operating)
and control (performance evaluation)
management decision making
In short, management accounting information is
pervasive and purposeful
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Management Accounting Information

Examples of management accounting information
include:
The costs of producing a product
The cost of delivering a service
The cost of performing an activity or business process
such as creating a customer invoice
The costs of serving a customer

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Management Accounting Information

Management accounting also produces
measures of the economic performance of
decentralized operating units, such as:
Business units
Divisions
Departments

These measures help senior managers assess

the performance of the companys decentralized
units

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Management Accounting Information

Management accounting information is a key
source of information for decision making,
improvement, and control in organizations
Effective management accounting systems can
create considerable value to todays
organizations by providing timely and accurate
information about the activities required for their
success

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Financial v. Management Accounting

Financial Accounting
Communicates economic
information to individuals
and organizations that
are external to the direct
operations of the
company
Stresses the form in
which it is communicated
Is based on historical
information

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Management Accounting
Provides information to
managers and employees
within the organization
Allows great discretion to
design systems that
provide information for
helping employees and
managers make
decisions
Forward looking

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A Brief History
The history of management accounting
comprises two characteristics:
1. Management accounting was driven by the
evolution of organizations and their strategic
imperatives
When cost control was the goal, costing systems
became more accurate
When the ability of organizations to adapt and change to
environmental changes became important, management
accounting systems that supported adaptability were
developed
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A Brief History
2. Management accounting innovations have
usually been developed by managers to
address their own decision-making needs
Management accounting needs to be both pragmatic
and add value to the organization

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Code of Conduct for

Management Accountants
The Institute of Management Accountants (IMA)
Standards of Ethical Conduct for Practitioners
of Management Accounting and Financial
Management have two major parts,
which offer guidelines for:
Ethical behavior.
Resolution for an ethical conflict.

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IMA Guidelines for Ethical Behavior

Do
Do not
not disclose
disclose confidential
confidential
information
information unless
unless legally
legally
obligated
obligated to
to do
do so.
so.
Do
Do not
not use
use
confidential
confidential
information
information for
for
unethical
unethical or
or illegal
illegal
advantage.
advantage.

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Confidentiality
Confidentiality
Ensure
Ensure that
that subordinates
subordinates do
do
not
not disclose
disclose confidential
confidential
information.
information.
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IMA Guidelines for Ethical Behavior

Mitigate
Mitigate conflicts
conflicts of
of
interest
interest and
and advise
advise others
others
of
of potential
potential conflicts.
conflicts.
Refrain
Refrain from
from
conduct
conduct that
that
would
would prejudice
prejudice
carrying
carrying out
out
duties
duties ethically.
ethically.

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Integrity
Integrity
Abstain
Abstain from
from activities
activities that
that
might
might discredit
discredit the
the
profession.
profession.

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IMA Guidelines for Ethical Behavior

Communicate
Communicateinformation
information
fairly
fairlyand
andobjectively.
objectively.

Credibility
Credibility
Disclose
Discloseall
allrelevant
relevant
information
informationthat
thatcould
could
influence
influenceaausers
users
understanding
understandingof
of reports
reports
and
andrecommendations.
recommendations.
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Disclose
Disclose delays
delays or
or
deficiencies
deficienciesin
in information
information
timeliness,
timeliness, processing,
processing, or
or
internal
internal controls.
controls.

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Why Have Ethical Standards?

Ethical
Ethical standards
standards in
in business
business are
are essential
essential for
for aa
smooth
smooth functioning
functioning advanced
advanced market
market economy.
economy.

Without ethical standards in business, the

economy, and all of us who depend on it for
jobs, goods, and services, would suffer.

Abandoning ethical standards in business would

lead to a lower quality of life with less
desirable
goods and services at higher prices.
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