ACCOUNTING CHAPTER ONE INTRODUCTION TO MANAGEMENT ACCOUNTING Accounting is the language of business. I will use accounting information in the following ways: As a manager of Afreecon, to make decisions and control the business, I need information on estimated billing rates, costs, demands, my competitive position and the profitability of the various services Marketing, Finance, HR etc As a shareholder in Kleos, I need information on the value of my investment and the income derived from my shareholding Outside business, I need information for: Obtaining a mortgage Running CRLE Running Doctors Health Initiative Management accounting is internal reporting i.e. for me as a manager and shareholder. As a manager, I will use accounting information to manage i.e. to plan, organize, direct and control. I will make decisions in the following ways: PLAN: o Identify my objective profit maximization o Search for alternative courses of action get information about future opportunities (products) and environments (markets). Done through Budgeting. o Select appropriate courses of action get information about different criteria (profits, market share, growth rate). Select most advantageous alternative. Done in Part 3. ORGANIZE & DIRECT: o Implement the decisions. Done through Budgeting CONTROL:
o Compare actual and planned outcomes. Done in Part
4. o Respond to divergences from plan (Go back to PLAN: Search for alternative courses of action) The following trends in the business environment have impacted cost accounting: Globalization and the competition from all across Africa means that I will have to analyze costs and profit by geographical location (Nigeria, etc.) The growth in the service industry and resulting competition from within Nigeria means that I have to understand my cost base and determine the sources of profitability for my products, customers and markets The speed with which I need to introduce new products (e.g. Afreecon) means that, to compete successfully, I need to manage my costs effectively at the design stage of Afreecon, have the capability to adapt to changing customer requirements and reduce the time to market of new and modified products With SAP and other ERPs, I can derive information directly from the system. The accountants job is now to interpret the information PART TWO CHAPTER SIX JOINT AND BY-PRODUCT COSTING
CHAPTER ONE SUMMARY - INTRO TO MANAGEMENT
ACCOUNTING Accounting decisions are used for planning, organizing, directing and controlling. Trends in the business environment that have affected cost accounting are: SAP/ERP Globalization Growth of the service industry Short product life-cycle