Management Accounting Flashcards
Planning
Planning involves establishing objectives and selecting appropriate strategies to achieve these objectives.
An objective is the aim or goal of an organisation.
A strategy is a possible course of action that might enable an organisation to achieve its objectives.
Planning can be either short-term (tactical and operational planning) or long-term (strategic planning).
Decision making
Decision making always involves a choice between alternatives.
About resources.
•About activities.
•Financial matters, particularly cost.
•Impact on employees.
•Impact on competitors
e.g. decide on the selling price to charge for a new product introduced on the market.
Control
Monitoring and comparing actual performance against planned targets.
Identifying variances and taking corrective actions to ensure goals are met.
Is outcome in accordance with the initial plans and objectives?
Costs
Profit
Steps of planning
Establish goals
Specify How Goals
Will Be Achieved.
Develop budgets
Decision making- what does it involve
Decision making involves making a selection among
competing alternatives.
What should
we be selling?
Who should
we be serving?
How should
we execute?
Controlling- what does it involve
The control function gathers feedback to
ensure that plans are being followed. Feedback in the form of performance reports that compare actual results with the budget
are an essential part of the control function.
What does Control require
Timely, relevant and accurate information
•Cost measurement
•Effective communication
•Organisational structure
•Responsibility and authority
Role of management accounting- DIRECTING ATTENTION
who should take action?”
“whose responsibility is this loss?”
“who is to be congratulated on this favourable result?”
Highlight those costs which have departed from expectations
fairness and timeliness
responsibility
recognise achievements
demonstrate accountability
Role of management accounting- KEEPING THE SCORE
“How much?”
“How many?”
•record-keeping
monitoring accounting records against physical quantities and measures
•completeness and fairness
matching costs to a time period
matching costs to an item of output
matching costs against revenue of the period
Role of management accounting- SOLVING PROBLEMS
“Why did that plan go well?”
“Why did that action fail?”
“Which of these three choices is the best to take?”
Relevance
Choices
Basis for understanding the problem
