managerial accounting pdf free download

managerial accounting pdf free download

The Importance and Applications of Managerial Accounting in Business

1. Introduction to Managerial Accounting

In fact, public accounting, in the form of income statements, balance sheets, and cash flow statements, represents accounts’ most widely recognized function. People are generally familiar with the idea of income measures representing performance over some period of time. These time frames can range from a day to a month to a quarter to a year, and the results presented in an income statement are a summary of financial performance for some accounting period. Likewise, the concept of net worth (assets – liabilities = equity), presented in a balance sheet, and measuring a certain point in time also garners instant recognition for the public. But, people must remember that accounting is the discipline of creating and communicating the “common language of business.” Equally important in the creation and dissemination of information are the stakeholders who are interested in the activities of an organization. Some information users (e.g. Wall Street investors, ratings agencies, public accounting) have rules or standards to govern both the preparation and the dissemination of accounting data used to evaluate organizations. Non-financial information is also used for tactical decision-making by various individuals within an organization.

Why is managerial accounting important to the business field and can be of particular interest to the prospective business student? The discipline of accounting has been around for centuries and serves as the information infrastructure for business firms worldwide. Accounting fulfills a communication function as it provides financial and non-financial information to various stakeholders about the economic activity of an organization. One area of accounting that fulfills this multitude of needs is managerial accounting. While the dominant public perception of accounting is providing historical financial information about business firms, that role is only one of many fulfillment functions performed for stakeholders.

2. Key Concepts and Techniques in Managerial Accounting

2.1 Costing evolves to support different aspects of the business value chain. 2.2 Costing across the business value chain. 2.2.1 Direct costs represent the value chain inputs provided by outsources. 2.2.3 Value Chain Value and Business Nodal Chain. 2.2.2 Decided that the inputs should be recorded at lower levels. 2.2.4 Atypical Value Chain Costs.

First, we introduce basic cost terms. Next, we find techniques used to analyze these cost terms. We then examine the cost behaviors unique to decision and control aspects of these Management Accounting techniques. Lastly, as a preliminary to a comprehensive analysis of costing, we consider Manufacturing and Nonmanufacturing Costs.

Cost is an important concept for organizations. As part of the system for planning and control, management uses costing information to perform a multitude of functions. This overview of key concepts and techniques is designed to answer the question: How do accountants help organizations complete essential management activities? By understanding the nature, behavior, and underlying information of costs, non-accounting organizational members can appreciate and eventually use the information provided by accountants. This is ultimately important to the success of an organization.

3. Strategic Decision-Making with Managerial Accounting

The strategy refers to a plan for accomplishing the business’ mission. It describes how the company competes with other companies, who its customers are, and what made the company a profitable and unique business. A successful business strategy leads to sustainable success for a business, but business strategies can change at least somewhat quickly due to changes in customer needs, technological advances, marketing initiatives, changes in costs, and other factors. Because of these reasons, a mechanized accounting approach is a vital tool for managers who are responsible for implementing their company’s strategic business plan. The field of managerial accounting is undergoing the changes that reflect the business environment in which modern companies exist. As manufacturing employment shifts from the United States and other developed nations to those that are less economically advanced, so too is managerial accounting taking on a different role in businesses. Earlier, the discussion of what is meant by managerial accounting outlined the types of accounting information that were available to managers working in different environments.

Managerial accounting’s application exercises also help students develop their decision-making skills. Analyzing various short and long-term decisions that businesses face is an important academic exercise for students who are studying business. It is not, however, merely an academic exercise. Pressures from financial analysts, shareholders, and other stakeholders force all managers to focus on the economic characteristics of business. Of course, a poorly made decision can still ruin a company even if accounting reports and analyses have been accurate. Managers clearly have a vital role to play in the act of decision-making. Finance departments, Blueprint for managers, Managerial accounting, and Decision-making skills. The purposes of this chapter are to describe the load and consultation features contained in the Definition and Management screen, explain the process of clearing prerequisites for class and student definition, and provide examples of class and student definition.

4. Managerial Accounting in Practice: Case Studies and Examples

The fixed cost per unit is cut in half by doubling the output (note that increasing to 20,000 mugs generates a $1.00 of total savings, which is $10,000/2, but because this amount is spread over 20,000 units, the savings per unit, measured as cost per mug, dropped 50%). This means that fixed costs are generally spread (or allocated) among all of the units produced. If less revenue per unit exists than expense per unit, operations should be scaled down to reduce losses. The fixed cost per unit declines as more and more units are produced. This is one reason larger manufacturers are usually more cost efficient. These insights are best understood about actual cost behavior with perplexing mixed or semi-variable cost structures.

The proportion of the budget, regardless of changes in the various activities and volume. Produce 10,000 mugs and the fixed cost per mug is $1.00 ($10,000 ÷ 10,000). If 20,000 mugs are produced, the fixed costs are halved, amounting to $0.50 per mug ($10,000 ÷ 20,000).

This chapter explored two cases that demonstrated how managerial accounting in practice can help businesses strategically. By putting yourself in the shoes of the decision makers in these examples, you may see the different applications of managerial accounting. Furthermore, some of the information from the examples helps to illustrate concepts initially introduced in Chapter 1 (sunk costs) and Chapter 2 (fixed and variable costs).

5. Future Trends and Innovations in Managerial Accounting

With respect to strategic management feedback and control systems, the trend towards planning and control in a nonroutine task environment, and the increase in nonfinancial measures of business unit performance will eventually influence the managerial accounting concepts, techniques, and reports used to stimulate goal congruence. As the use of just-in-time manufacturing methods increases, the use of flexible standard costs and the use of interpretation aids in variance investigation will become increasingly important. In addition, it is becoming increasingly clear that the strategic management process must provide timely, high-quality information about performance and suggest changes in policies and strategic direction.

In conclusion, the paper identifies some key trends and innovations in managerial accounting practices. Some of these changes will drive conceptual, measurement, and reporting changes in the near future. For example, a heightened interest in business reporting and disclosure is likely to drive significant changes in reporting formats. With respect to accounting systems and controls, leading-edge companies are finding new uses for real-time, transaction-based data. The expansion of externally focused performance measurement and benchmarking allows for more meaningful feedback. With the availability of expanded performance data and the implementation of performance measurement and incentive systems, leading companies are finding that the ability to motivate and reward efficiently is improved.