Introductory Management Accounting Lecture 1 CRISTIANO BUSCO Senior Lecturer Accounting and Finance Cristiano Busco Introductory Management Accounting Introductory Management Accounting Structure: Along with the lectures, there will also be 5 one hour workshop held on weeks 3, 4, 6, 7 and 8 (see the course outline for details of the lectures and workshops). Attendance at workshops is compulsory. These workshops will review exercises based on the ideas and techniques discussed in the lectures (see course outline). It is essential that they are prepared in advance. In addition, self-study exercises are indicated for each topic - a number of these exercises are taken from the textbook and answers appear at the end of the book. Answers to the other self study exercises and to workshop exercises will be placed on the course website at the appropriate time. Cristiano Busco Introductory Management Accounting Introductory Management Accounting The recommended textbook, which is essential reading, is: “Management Accounting for Decision Makers”, 5th Edition, by Peter Atrill and Eddie McLaney. Arnold, J. and Turley, S. Accounting for Management Decisions, 3rd Edition, 1996, Prentice-Hall is not the recommended text but is highly recommended reading for certain lecture topics: Copies are available from the library on short loan. In addition, it can also be a good idea, for general familiarisation, to "dip into" accounting periodicals taken in the libraries, for example Accountancy, the Journal of Accountancy and Financial Management (previously called Management Accounting), and the financial press. Cristiano Busco Introductory Management Accounting Introductory Management Accounting Study requirements: Lectures are used to introduce material, outline accounting techniques and raise issues about their use. The workshops are intended to reinforce technical understanding through numerical examples and other exercises. In addition, self-study is required for background reading and further exercises. The individual topic outlines in the study pack give you an overview of each topic, the relevant reading and the associated workshop and self-study exercises. Cristiano Busco Introductory Management Accounting Introductory Management Accounting Lecturer(s): Cristiano Busco – ChunLei Yang Course Aims: • Introductory Management Accounting is designed to introduce the main foundations of accounting within organisations. • The course offers broad coverage of the principal areas of management accounting, and provides the foundations for further study in the area in subsequent years. • It aims to develop an understanding of how management accounting is involved in organisational life – setting plans, taking decisions and measuring actual activities. Cristiano Busco Introductory Management Accounting Introductory Management Accounting Lecturer(s): Cristiano Busco – ChunLei Yang Learning Outcomes: • Understand the main elements of management accounting and the context in which it operates. • Have knowledge of the basic techniques and practices of management accounting • Be aware of some of the alternative approaches and theories which available. • Appreciate the potential and the limitations of management accounting. Cristiano Busco Introductory Management Accounting Introductory Management Accounting Lecturer(s): Cristiano Busco – ChunLei Yang Syllabus: The course will explore the nature of the issues and the techniques used in the key areas of management accounting: • Concepts for cost and revenue recognition. • Approaches to cost accumulation and recording. • The use of cost and revenue information in decision making. • The use accounting information for planning and control. • Performance management It will set these techniques in their organisational context and explore the alternatives which are available to the management accountant, as well as discussing their strengths and limitations. Cristiano Busco Introductory Management Accounting Definition of Accounting Accounting: The process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information (AAA) Users of accounting information can be divided into two Categories: (i) External parties outside the organization (financial accounting) (ii) Internal parties within the organization (management accounting) Cristiano Busco Introductory Management Accounting Definition of Accounting PROCESS Accounting is not just techniques - these have to be implemented as part of a "human” process - Accounting as a Social System IDENTIFYING AND MEASURING Identify the object of analysis (i.e., cost objects) What gets measured becomes recognised (“what you measure is what you get”) But measurement can be difficult. - Accounting as a Measurement System Cristiano Busco Introductory Management Accounting Definition of Accounting COMMUNICATING Accounting “The Language of Business” - Accounting as a Communication System INFORMATION Accounting can be broadly based to include data that is: quantitative - qualitative financial - non-financial - Accounting as an Information System DECISIONS BY USERS The choice of information depends on the user’s information needs - Accounting as a Decision Support System Cristiano Busco Introductory Management Accounting Managerial vs. financial accounting Managerial – Internal parties • Executives, Management, Employees, Directors, etc. Financial – External parties • Shareholders, creditors, investors, suppliers customers, community, etc. – Inform internal decisions and provide feedback and control on operating performance – Report on past performance to external parties (both to owners and lenders) – Timely and future-oriented – Delayed and historical – Tailor-made to internal needs (“best practices”) – Regulated by GAAP, IAS, etc. – Financial and operational performance measures – Financial measures only – Desegregation to inform local decisions and actions – Highly aggregate; report on entire organization Cristiano Busco Introductory Management Accounting Course structure: Introduction to Management Accounting (L1 & L2) Relevant Costs (L3) Cost behaviour (L4) Approaches to cost accumulation and recording (L5 & L6) Using cost and revenue information in decisions: Cost-volume-profit analysis (L7) Using accounting information for operating decisions (L8) Using accounting information for planning and control: Budgeting (L9 & L10) Variance analysis (L11 & L12 ) Performance management (L13 & L14) Review and test (L15) Cristiano Busco Introductory Management Accounting
