chapter 1 · chapter 1 9 managerial decision making organizational strategies are the tactics that...
TRANSCRIPT
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The Role of Accounting Information
in Management Decision Making
Key Topics: • Cost Versus Financial Accounting
• Management Decision Making
• Decision Quality
• Steps for Better Thinking
• Relevant Information
• Ethical Decision Making
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What is Accounting?
Accounting is An information system that: • Measures and records transactions
• Aggregates information
• Communicates information to users through reports
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What are the types of
Accounting?
There are three types of Accounting • Cost Accounting
• Financial Accounting
• Managerial Accounting
Financial, Managerial, and Cost Accounting
Financial accounting prepares
reports most frequently used by
external decision makers to the
organization.
Managerial accounting prepares
reports most frequently used by
internal decision makers to the
organization.
Cost accounting is a “method for measuring the cost of a project, process, or
thing”*. It includes both financial and nonfinancial information and is used for
both financial and managerial accounting.
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The Relationship between
Cost, Managerial and Financial
Accounting
• Managers • Other employees
• Investors (stockholders and creditors) and potential investors
• Regulators • Other external decision makers
Financial, Managerial, and Cost Accounting
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Strategic Cost Management
and the Balanced Scorecard
• Strategic cost management is an approach to
reducing costs while strengthening the
organization’s strategic position.
• The balanced scorecard can be used to
formalize strategic cost management efforts by
detailing financial and nonfinancial benchmarks
for all segments of the organization.
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EXHIBIT 1.1 Overview of Management
Decision Making
Managerial Decision Making
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Managerial Decision Making
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Managerial Decision Making
Note 1:
The organizational vision and the core
competencies are closely related.
The organization’s strengths should help shape the
vision
The vision should help locate the organization’s
strengths.
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Managerial Decision Making
Organizational strategies are the tactics that
managers use to work toward the organizational
vision while taking advantage of the core
competencies
These strategies are long-term in nature.
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Managerial Decision Making
Operating plans are the short-term
implementations of the organizational strategies.
Operating plans usually include budgeted goals for
revenues and expenses.
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Managerial Decision Making
Actual operations are the actions taken and the
results achieved.
The organization’s information system measures
the results of actual operations.
Examples include number of units sold, advertising
expense, and the wage expense for the period.
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Managerial Decision Making • Managers use the results of actual operations to
monitor performance and ensure that it is in line
with the organizational vision.
• Managers may find that the results of actual
operations make them re-think the
organizational vision or their view of the
organization’s core competencies
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Managerial Decision Making ■ Measuring, Monitoring, and Motivating
The feedback loop in Exhibit 1.1 encompasses
the systems and routines that managers use to
increase the likelihood of organizational
success. These systems are often called
management control systems.
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What type of Control Systems do
Managers Use
1- Belief systems
inspire and direct
employees to take
actions that are consistent
with the organizational
vision. Managers may
communicate belief
systems using one or more
formal statements.
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What type of Control Systems do
Managers Use
2- Boundary systems
establish limits on individual
behaviour. Common
boundary systems include
codes of conduct and
budgets.
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What type of Control Systems do
Managers Use
3- Diagnostic Control
systems
• By establish preset
goals that must be
achieved for the
organization’s strategy
to be successful.
• measure, monitor, and
motivate employees to
achieve preset goals
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What type of Control Systems do
Managers Use
3- Interactive control
systems
• are recurring sets of
information that require
attention from
managers from many
levels
• Requires managers to
communicate and
stimulates debates to
get new insight
This
information requires them to communicate
interactively and stimulates debates about
what the
information means, leading to new insights
about strategic challenges and
opportunities
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Higher Quality Decisions
Path to Higher-Quality
Management Decisions
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Higher Quality Decisions
The main factors that may reduce
decision quality.
• Uncertainties are issues and information about which there is doubt.
• Biases are preconceived notions adopted without careful thought.
معلومات تم استخدامها بدون فكر
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Relevant Information
Information is relevant if it:
– Differs across the alternatives, and
– Is about expected future costs or
revenues
Relevant information can include:
– Quantitative data such as revenues and costs
– Qualitative (non-numerical) factors
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Exercise: Relevant
Information