Management Decisions and Control
Management Decisions and Control Thursday, 30 July 2015
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4:02 PM
Management accounting: Focuses on effective and efficient management of resources Is relied on by internal users to make investment decisions Is a part of an organisation's management information system Is relied on by managers to plan and control an organisation's operations Is concerned with both financial and non-financial information Systems need to accumulate information from both internal and external sources
Management and Value: ▫ Primary objective of a firm's management is to increase the firm's value ▫ Managers may be faced with a conflict between increasing customer value and shareholder value A management accounting should: ▫ Provide daily information on physical measures of operational performance ▫ Assist in interdepartmental communications ▫ Develop and implement information systems Sequence for commencing organisation (managing?) is: ▫ Planning - Setting objectives ▫ Control - Putting mechanisms into place to ensure plans are being met ▫ Feedback - Determining success or failure of objectives
Differences Between Management Accounting & Financial Accounting ▫ Financial Accounting • Preparing and reporting accounting information • For external parties • Based on historical information • Emphasises reliability and verifiability • Constrained by regulations and standards ▫ Management Accounting • Draws data from both internal and external information • Not constrained by regulations and standards • For internal use only • Emphasises relevance and timeliness • Current and future-orientated ▫ Cost accounting is a subset of management accounting (and financial accounting)
Organisational strategies: ▫ Corporate Strategy • Decisions about the types of businesses in which to operate, which businesses to acquire and divest, and how best to structure and finance the organisation ○ Single business ○ Multiple business units ▫ Competitive Business Strategy • The way the business competes within its chosen market • Price $$ ○ Cost leadership ○ Differentiation ○ Niche ▫ Operations Strategy • How organisation delivers competitive strategy • Processes and organisation ○ Daily activities ○ Core processes • Tactical and operational decisions
Management Accounting Design - Theories ▫ Institutional Theory • States that the design of an organisation's management accounting system may be influenced by the need for legitimacy and the tendency for firms to imitate the "good practice" from other organisations. ▫ Contingency Theory • Assumes that the design of an organisation's management accounting system may be influenced by a range of factors including the external environment technology, organisational structure, organisation sixe, strategy, and organisation and national culture. MDC Page 1
environment technology, organisational structure, organisation sixe, strategy, and organisation and national culture.
MDC Page 2
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4:02 PM
Management accounting: Focuses on effective and efficient management of resources Is relied on by internal users to make investment decisions Is a part of an organisation's management information system Is relied on by managers to plan and control an organisation's operations Is concerned with both financial and non-financial information Systems need to accumulate information from both internal and external sources
Management and Value: ▫ Primary objective of a firm's management is to increase the firm's value ▫ Managers may be faced with a conflict between increasing customer value and shareholder value A management accounting should: ▫ Provide daily information on physical measures of operational performance ▫ Assist in interdepartmental communications ▫ Develop and implement information systems Sequence for commencing organisation (managing?) is: ▫ Planning - Setting objectives ▫ Control - Putting mechanisms into place to ensure plans are being met ▫ Feedback - Determining success or failure of objectives
Differences Between Management Accounting & Financial Accounting ▫ Financial Accounting • Preparing and reporting accounting information • For external parties • Based on historical information • Emphasises reliability and verifiability • Constrained by regulations and standards ▫ Management Accounting • Draws data from both internal and external information • Not constrained by regulations and standards • For internal use only • Emphasises relevance and timeliness • Current and future-orientated ▫ Cost accounting is a subset of management accounting (and financial accounting)
Organisational strategies: ▫ Corporate Strategy • Decisions about the types of businesses in which to operate, which businesses to acquire and divest, and how best to structure and finance the organisation ○ Single business ○ Multiple business units ▫ Competitive Business Strategy • The way the business competes within its chosen market • Price $$ ○ Cost leadership ○ Differentiation ○ Niche ▫ Operations Strategy • How organisation delivers competitive strategy • Processes and organisation ○ Daily activities ○ Core processes • Tactical and operational decisions
Management Accounting Design - Theories ▫ Institutional Theory • States that the design of an organisation's management accounting system may be influenced by the need for legitimacy and the tendency for firms to imitate the "good practice" from other organisations. ▫ Contingency Theory • Assumes that the design of an organisation's management accounting system may be influenced by a range of factors including the external environment technology, organisational structure, organisation sixe, strategy, and organisation and national culture. MDC Page 1
environment technology, organisational structure, organisation sixe, strategy, and organisation and national culture.
MDC Page 2
