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- Process and techniques that focus on the effective and efficient use of organisational resources to support managers in their tasks of enhancing both customer value and shareholder value
- Effectiveness: focuses managers on the successful achievement of an objective
- Efficiency: focuses managers on achieving the objective with the least possible consumption of resources
- The value that a customer places on particular features of a product
- Satisfied customers= increase in sales and market share = increase in shareholder value
- The value that shareholders, or owners, place on the business
- Managers may need to make trade offs between undertaking actions that increase customer value and actions that increase shareholder value
- Where there is conflict, SV likely to be given priority as this is most strategic objective however might be diff if not-for-profit
Management accounting systems
- An information system that produces the information required by managers to create value and manage resources
- Management accounting info can be provided on regular or ad hoc basis
Management accounting info
- Focus is on the needs of managers within the organisation
- There is great flexibility in deciding type of info as standards only apply to external reports
- eg. senior managers requires info that provides overview of entire organisation
- Middle managers require more detail about their area of responsibility
- Operational managers will need info to help them manage their specific operations on a day-to-day bases to ensure their performance targets are met
Managers who have responsibility for activities in the manufacturing areas of manufacturing firms, or for areas that directly provide services to customers in service firms
- The vast amount of data continually collected through devices and technologies such as credit cards, loyalty cards, social media
- This type of data lacks 'form'
- Requires continual development of advanced analytical tools that organisations can use to derive meaningful insights
- Potential to allow organisations to scan environment more effectively to better identify trends, threats and opportunities
- Can be difficult and expensive to extract value from big data
- Must develop new performance measures. By having more unstructured data such as comments, reviews
Differences between financial and management accounting
- Management accounting provided to people within the organisation, whereas financial accounting info is provided to parties outside of the organisation
- Management accounting is unregulated, whereas financial is legally required to conform to Australian accounting standards and corps law
- Primary source of data: financial accounting is solely based on basic accounting accounting system which accumulates financial info whereas management uses this PLUS data from many other sources, which can yield info such as rates of defective product manufactured, average take off delays in airlines
- Management accounting focuses on specific areas of the organisation such as a division, region or product lines. This info uses historical data as well as estimates and projections of future costs and revenue. Data may be subjective and emphasises reporting info that is relevant and timely
- Whereas financial accounting reports tend to focus on the enterprise in its entirety, almost exclusively based on verifiable transaction data and on reliability rather than relevance and the reports are not timely
Difference between cost accounting and management accounting
- Cost accounting system is one part of an organisation's overall accounting system, the purpose off which is to estimate the COG and services, as well as cost of organisation units such as departments.
- Info from this is used for both management and financial accounting.
- Management is broader- refer to definition
Organisation vision, mission and objectives, strategies
- Vision: desired future state or aspiration of an organisation eg. RSPCA "To be the leading authority in animal care and protection"
- Mission statement: defines the purpose and boundaries of the organisations. Eg "To prevent cruelty to animals by actively promoting their care and protection
- Objectives (or goals): specific statements of what the organisation aims to achieve, often quantified and relating to a specific period of time
- Strategies: the direction that the organisation intends to take over the long term, to meet its mission and achieve its objectives
2 types of business strategy
- Business strategy: The way a business competes within its chosen market
- Cost leadership: a business strategy where a firm is a low-cost producer, which allows the business to sell good or services at a lower price than competitors
- Product differentiation: a business strategy whereby a firm derives competitive advantage from offering goods or services that have characteristics different from those offered by competitors
Planning and control
- Planning: broad concept that is concerned with formulating the direction for future operations to meet strategy. Formulate detailed schedules and timelines
- -> budget: detailed plan of future financial consequences of an organisation.
- Control: putting mechanisms in place to ensure that operations proceed according to plan and that objectives are achieved.
- ->control systems: systems and procedures that provide regular info to assist in control