Summary Management Accounting
General Approach
“Management accounting” refers to the use of quantitative, esp. financial, information in
organizations.
Management accounting systems provide information about the organization and its
activities to managers to help them make decisions.
o The internal accounting system is an information system for decision making, e.g.
budgets, data on costs, periodic financial reports (key concept: opportunity costs)
o But it’s also part of the organization’s set of control mechanisms (key concept:
organizational architecture)
Principles underlying this course
1. Managerial accounting is an important part of the structure of the organization and not
just a collection of computational techniques.
2. We assume that individuals have the disposition to maximize their self-interest; hence a
conflict of interests exists between owners of company and employees/ managers that could
pull the organization apart
3. A system that has to perform these two tasks gives rise to a fundamental trade-off:
providing knowledge for decision-making and providing information about performances of
employees (control-purpose)
Accounting information is about:
value of assets
the costs of products and processes
o fixed costs that do not change with volume
o variable costs that do change with volume
result of activities (production, sales, etc)
performance of employees
Information is used for decisions:
product pricing and marketing
strategy and long-range planning
resource allocation decisions
efficiency of operations
performance measurement and management
evaluation of managers and employees
Framework for this course:
1. Business Environment
2. Business Strategy
3. Organizational Architecture
a. Decision-Right Assignment
b. Performance Evaluation
c. Reward System
4. Incentives and Actions
5. Firm Value
a. Allocating Decision-Rights
Management process: the allocation of decision rights to firm departments and individuals
All economic resources are bundles of decision rights
General Approach
“Management accounting” refers to the use of quantitative, esp. financial, information in
organizations.
Management accounting systems provide information about the organization and its
activities to managers to help them make decisions.
o The internal accounting system is an information system for decision making, e.g.
budgets, data on costs, periodic financial reports (key concept: opportunity costs)
o But it’s also part of the organization’s set of control mechanisms (key concept:
organizational architecture)
Principles underlying this course
1. Managerial accounting is an important part of the structure of the organization and not
just a collection of computational techniques.
2. We assume that individuals have the disposition to maximize their self-interest; hence a
conflict of interests exists between owners of company and employees/ managers that could
pull the organization apart
3. A system that has to perform these two tasks gives rise to a fundamental trade-off:
providing knowledge for decision-making and providing information about performances of
employees (control-purpose)
Accounting information is about:
value of assets
the costs of products and processes
o fixed costs that do not change with volume
o variable costs that do change with volume
result of activities (production, sales, etc)
performance of employees
Information is used for decisions:
product pricing and marketing
strategy and long-range planning
resource allocation decisions
efficiency of operations
performance measurement and management
evaluation of managers and employees
Framework for this course:
1. Business Environment
2. Business Strategy
3. Organizational Architecture
a. Decision-Right Assignment
b. Performance Evaluation
c. Reward System
4. Incentives and Actions
5. Firm Value
a. Allocating Decision-Rights
Management process: the allocation of decision rights to firm departments and individuals
All economic resources are bundles of decision rights
