Lecture 1: Introduction to Modern Management Accounting
Lecture 1: Introduction to Modern Management Accounting 04 October 2010
Topics • Forces of change • Contemporary issues • The "new economy" • Costing
Reading • Strategic Finance (Chapter 1,2)
Forces of Change Traditional Management Accounting Model
Budgets are the accounting tool for implementing the planning action Control is the capturing of the difference in actual to planned results List of Forces of Change in Management Accounting The 1970s were hard times Started with OPEC prices ↑ Any company that faces constraints becomes inward facing This leads to management accounting Servicing the needs of the services industries The west became more service orientated 80% of OECD GDP is accounted for by the service sector The advent of technology Meant companies became more complex Subservience to financial accounting The residues of Japan + new influences By the late 1970s Japan was taking over western markets Japanese management influenced western management accounting Strategizing accounting Accounting for intellect Management Accounting versus Financial Accounting Users Standards Levels of detail ○ Time focus / personalisation Volume of information New Management Accounting Model
Changes in Management Accounting Backward looking → Forward looking Internal focus → External perspective Product/Services → Customers and markets Financial data → Financial and non-financial information Functional → Process Information → Knowledge The Traditional Finance Function
7.5 pence in every £1 spent goes to the finance department We can cut costs by outsourcing services
Course Notes Page 1
Key Points • Forces of change in MA • MA vs. FA • Contemporary issues of MA • Cost management issues • Absorption costing • Variable costing • CVP analysis • CVP assumptions (5)
Topics • Forces of change • Contemporary issues • The "new economy" • Costing
Reading • Strategic Finance (Chapter 1,2)
Forces of Change Traditional Management Accounting Model
Budgets are the accounting tool for implementing the planning action Control is the capturing of the difference in actual to planned results List of Forces of Change in Management Accounting The 1970s were hard times Started with OPEC prices ↑ Any company that faces constraints becomes inward facing This leads to management accounting Servicing the needs of the services industries The west became more service orientated 80% of OECD GDP is accounted for by the service sector The advent of technology Meant companies became more complex Subservience to financial accounting The residues of Japan + new influences By the late 1970s Japan was taking over western markets Japanese management influenced western management accounting Strategizing accounting Accounting for intellect Management Accounting versus Financial Accounting Users Standards Levels of detail ○ Time focus / personalisation Volume of information New Management Accounting Model
Changes in Management Accounting Backward looking → Forward looking Internal focus → External perspective Product/Services → Customers and markets Financial data → Financial and non-financial information Functional → Process Information → Knowledge The Traditional Finance Function
7.5 pence in every £1 spent goes to the finance department We can cut costs by outsourcing services
Course Notes Page 1
Key Points • Forces of change in MA • MA vs. FA • Contemporary issues of MA • Cost management issues • Absorption costing • Variable costing • CVP analysis • CVP assumptions (5)
