question

Processing any economic transaction means:

answer

collecting categorizing, summarizing, and analyzing

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Accounting systems provide:

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the information found in a firm's income statement, balance sheet, statement of cash flow, and performance reports

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Enterprise Resource Planning (ERP) system

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a single database that collects data and feeds them into applications that support a company's business activities, such as purchasing, production, distribution, and sales

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financial accounting:

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focuses on reporting financial information to external parties such as investors, government agencies, banks, and suppliers based on GAAP. The most important way financial accounting information affects manager's decisions and actions is through compensation, which is often, based on numbers in financial statements

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management accounting:

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the process of measuring, analyzing, and reporting financial and non-financial information that helps managers make decisions to fulfill the goals of an organization

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managers use management accounting information to:

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1. develop, communicate, and implement strategies 2. coordinate product design, production, and marketing decisions and evaluate a company's performance

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cost accounting:

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provides information for both management accounting and financial accounting professionals. It is the process of measuring, analyzing, and reporting financial and non-financial information related to the costs of acquiring or using resources in an organization

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cost management:

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term used to describe the activities managers undertake to use resources in a way that increases a product's value to customers and achieves an organization's goals. Not only about reducing costs; it also includes making decisions to incur additional costs, whether or not to enter new markets, implement new organizational processes, and change product designs

question

purpose of information: management vs. financial:

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1. management: help managers make decisions to fulfill an organization's goals 2. financial: communicate an organization's financial position to investors, banks, regulators, and other outside parties

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primary users: management vs. financial:

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1. management: managers of the organization 2. financial: external users such as investors, banks, regulators, and suppliers

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focus and emphasis: management vs. financial:

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1. management: future-oriented 2. financial: past- oriented

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rules of measurement and reporting: management vs. financial:

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1. management: internal measures and reports do not have to follow GAAP but are based on cost- benefit analysis 2. financial: financial statements must be prepared in accordance with GAAP and be certified by external, independent auditors

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time span and type of reports: management vs. financial:

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1. management: varies from hourly information to 15-20 years, with financial and non-financial reports on products, departments, territories and strategies 2. financial: annual and quarterly financial reports, primarily on the company as a whole

question

behavioral implications: management vs. financial:

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1. management: designed to influence the behavior of managers and other employees 2. financial: primarily reports economic events but also influences behavior because manager's compensation is often based on reported financial results

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strategy:

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specifies how the organization matches its own capabilities with the opportunities in the marketplace; describes how an organization will compete and the opportunities its managers should seek and pursue

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management accountants work closely with managers in various departments to formulate strategies by providing information about the sources of competitive advantage, such as:

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1. the company's cost, productivity, or efficiency advantage relative to competitors 2. the premium prices a company can charge relative to the costs of adding features that make its products or services distinctive

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strategic cost management:

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describes cost management that specifically focuses on strategic issues

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management accounting information helps managers formulate strategy by answering questions such as:

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1. who are our most important customers and how can we be competitive and deliver value to them? 2. what substitute products exist in the marketplace, and how do they differ from our product in terms of features, price, cost and quality? 3. what is our most critical capability? Is it technology, production or marketing? How can we leverage it for new strategic initiatives? 4. will adequate cash be available to fund the strategy or will additional funds need to be raised?

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value chain:

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the sequence of business functions by which a product is made progressively more useful to customers

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six primary business functions:

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1. research and development 2. design of products and processes 3. production 4. marketing 5. distribution 6. customer service

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customer relationship management (CRM):

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a strategy that integrates people and technology in all business functions to deepen relationships with customers, partners, and developers. CRM initiatives use technology to coordinate all customer- facing activities (such as marketing, sales calls, distribution and after- sales support) and the design and production activities necessary to get products to customers

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supply chain:

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part of the value chain associated with producing and delivering a product or service- production and distribution. Describes the flow of flow of goods, services, and information from the initial sources of materials and services to delivery of products to consumers, regardless of whether those activities occur in one organization or in multiple organizations

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key success factors:

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1. cost and efficiency 2. quality 3. time 4. innovation 5. sustainability

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total quality management (TQM):

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an integrative philosophy of management for continuously improving the quality of products and processes. Managers who implement TQM believe that each and every person in the value chain is responsible for delivering products and services that exceed customer expectations

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important dimensions of time factor:

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new product development time and customer response time

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sustainability:

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the development and implementation of strategies to achieve long-term financial, social, and environmental goals

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sustainability is important to companies because:

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1. more and more investors care about sustainability 2. companies that emphasize sustainability find that sustainability goals attract and inspire employees 3. customers prefer the products of companies with good sustainability records and boycott companies with poor sustainability records 4. society and activist non-governmental organizations, in particular, monitor the sustainability performance of firms and take legal action against those that violate environmental laws

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five step decision making process:

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1. identify the problem and uncertainties 2. obtain information 3. make predictions about the future 4. make decisions by choosing among alternatives 5. implement the decision, evaluate performance, and learn

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planning:

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refers to steps 1-4 of the decision making process; consists of selecting an organization's goals and strategies, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to achieve them to the entire organization

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budget:

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most important planning tool when implementing strategy; the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan

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control:

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part of step 5 of the decision making process; comprises taking actions that implement the planning decisions, evaluating past performance, and providing feedback and learning to help future decision making

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learning:

answer

involves examining past performance (the control function) and systematically exploring alternative ways to make better-informed decisions and plans in the future. Can lead to changes in goals, strategies, the ways decision alternatives are identified, and the range of information collected when making predictions and sometimes can lead to changes in managers

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planning and control activities must be:

answer

flexible enough so that managers can seize opportunities unforeseen at the time the plan was formulated

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three guidelines help management accountants provide the most value to the strategic and operational decision making of their companies:

answer

1. employ a cost- benefit approach 2. give full recognition to behavioral and technical considerations 3. use different costs for different purposes

question

cost benefit approach:

answer

approach to decision- making and resource allocation based on a comparison of the expected benefits from attaining company goals and the expected costs

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behavioral and technical considerations:

answer

help managers make wise economic decisions by providing them with the desired information in an appropriate format and at the preferred frequency

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line management:

answer

i.e production, marketing, and distribution management; directly responsible for achieving the goals of the organization

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staff management:

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i.e management accountants and information technology and human- resources management; provides advice, support, and assistance to line management

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chief financial officer (CFO)

answer

AKA financial director; the executive responsible for overseeing the financial operations of an organization

question

responsibilities of a CFO:

answer

1. controllership 2. treasury 3. risk management 4. taxation 5. investor relations 6. strategic planning

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controllership

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provided financial information for reports to managers and shareholders and oversees the overall operations of the accounting system

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treasury

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oversees banking and short and long term financing, investments, and cash management

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risk management:

answer

manages the financial risk of interest- rate and exchange rate changes and derivatives management

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taxation:

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plans income taxes, sales tax, and international taxes

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investor relations:

answer

communicates with, responds to, and interacts with shareholders

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strategic planning:

answer

defining strategy and allocating resources to implement strategy

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controller:

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AKA chief accounting officer; the financial executive primarily responsible for management and financial accounting; modern controllers have no line authority except over their own departments

question

management accounting beyond numbers:

answer

management accountants must: 1. work well in cross- functional teams and as a business partner 2. promote fact- based analysis and make tough- minded decisions, critical judgments without being adversarial 3. lead and motivate people to change and be innovative 4. communicate clearly, openly, and candidly 5. have a strong sense of integrity

question

Sarbanes Oxley

answer

passed in 2002 in response to a series of corporate scandals. Focused on improving internal control, corporate governance, monitoring of managers, and disclosure practices of public corporations. CEOs and CFOs must certify that the financial statements of their firms fairly represent the results of their operations

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