Managerial Accounting

Faculty- Rezwanul Mumtahin Husain

Chapter 1:Managerial Accounting:

An Overview

After studying this chapter, you should

understand
- What is business strategy and customer value proposition
- What is management and main activities in management
- Differences between managerial and financial accounting
- Understand organizational structures
- Understand the skills managers require to succeed
- Understand process management
- What is lean production, theory of constraints, and total
quality management.

Strategy: A game plan that enables a company

to attract customers by distinguishing itself from
competitors.
-Customer value proposition
Three categories of customer value
proposition
1.Customer intimacy
2.Operational excellence
3.Product leadership

Main management functions and activities:

1.Planning
2.Controlling
3.Decision Making
Planning: It involves establishing a basic strategy, selecting a course
of action and specifying how the action will be implemented.
Controlling: It involves ensuring that the plan is actually carried out
and modified as circumstances change.

Decision Making: The thought process of selecting a logical choice

from the available options. Basically answers three questions:
a) What should we be selling?
b) What should we be serving?
c) How should we execute?

Managerial Accounting and Financial Accounting

-Managerial Accounting
-Financial Accounting
Comparisons between managerial and financial accounting
Managerial Accounting

Financial Accounting

1. Prepared for Insiders

Prepared for external parties

2.Empasize decisions affecting future

Emphasizes financial consequences of

past performance

3.Empasizes relevance

Emphasizes objectivity and

verifiability

4.Empasizes timeliness

Emphasizes precision

5.Need not follow GAAP

Must follow GAAP

6. Emphasizes detailed presentation

Emphasizes summary presentation

7.Not mandatory

Mandatory for external reports

Organizational structure
-Centralized
-Decentralized

Skills managers need to succeed:

a) Strategic Management Skills
b) Enterprise Risk Management Skills
c) Process Management Skills (Lean Production and
TOC)
d) Leadership Skills

Process Management
Business process: A series of steps that are followed to
carryout some task in a business.

Value chain: A form of business process that shows

how functional departments in an organization interact
to add value.
Approaches to improve business processes
1. Lean production
2. Theory of Constraints (TOC)

Lean production: It is a five step management approach that

organizes resources around the flow of business processes and
pulls units through these processes in response to customer needs.
-The fourth system in Lean model is to create a pull system also
known as JIT system.
Theory of Constraints (TOC): A management approach that
emphasizes the importance of management constraints.

Reading Material
Managerial Accounting, Ray H. Garrison, Eric W.
Noreen & Peter C. Brewer, 14th Ed, McGraw-Hill Irwin.
Chapter 1: Managerial Accounting: An Overview