Chapter 1 Managerial Accounting An Overview What is Managerial Accounting Financial accounting is concerned with reporting financial information to external parties such as stockholders creditors and regulators Managerial accounting is concerned with providing information to managers for use within the organization o Emphasizes decisions affecting the future relevance timeliness and segment performance o Segment is a part or activity of an organization about which managers would like cost revenue or profit data o Not mandatory and it does not need to comply with externally imposed rules o Helps managers perform 3 vital activities Planning involves establishing goals and specifying how to achieve them Budget a detailed plan for the future that is usually expressed in formal quantitative terms Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change Performance report compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identity and eliminate sources of unsatisfactory performance Decision making involves selecting a course of action from competing alternatives What Skills Do Managers Need to Succeed Strategic management skills o Strategy game plan that enables a company to attract customers by distinguishing itself from competitors strategy influences the plans a manager puts forth o Customer value propositions the reasons for customers to choose one company over another Customer intimacy we can customize our products Operational excellence we deliver products faster more conveniently and at a lower price Product leadership we offer higher quality products Enterprise risk management skills o Enterprise risk management is a process used by a company to identify risks associated with a business strategy plan decisions and develop responses to them that enable it to be reasonably assured of meeting its goals Process management skills o Improve business processes that serve customers o Business process is a series of steps that are followed in order to carry out some task in a business o Value chain consists of the major business functions that add value to a company s products services o Lean production is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders just in time production o Theory of constraints TOC is based on the insight that effectively managing the constraint is a key to success fix the weakest link Constraint is anything that prevents you from getting more of Measurement skills what you want Leadership skills o Use measurement skills to provide competent data drive answers o Technically competent person of high integrity understand how to effectively implement organizational change strong communication skills capable of motivating and mentoring others effectively manage team based decision processes The Importance of Ethics in Business Statement of Ethical Professional Practice o Maintain a high level of professional competence o Treat sensitive matters with confidentiality o Maintain personal integrity o Disclose information in a credible fashion Corporate Social Responsibility Corporate social responsibility CSR is a concept whereby organizations consider the needs of all stakeholders when making decisions Socially responsible investors control a large amount of investment capital A growing number of employees want to work for a company that recognizes and responds to its social responsibilities Many customers want to purchase products from socially responsible companies Nongovernment organizations and activists are more capable than ever of tarnishing a company s reputation by publicizing its environmental or human rights missteps Social performance can impact financial performance
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