Managerial Accounting - Chapter 1

Key Concepts in Managerial Accounting

• Activity Accounting: Involves collecting financial or operational performance data on significant enterprise activities.
• Activity-Based Costing (ABC) System: Two-stage process assigning overhead costs to products based on resource consumption and activity cost pools, with subsequent allocation to product lines via cost drivers.
• Activity-Based Management (ABM): Utilizes ABC systems to enhance organizational operations and effectiveness.
• Attention-Directing Function: Refers to managerial accounting's role in highlighting issues requiring managerial focus.
• Balanced Scorecard: A performance evaluation model that integrates metrics on financial health, internal processes, innovation, and customer satisfaction.

Professional Roles

• Certified Management Accountant (CMA): Credential for accountants specializing in managerial accounting.
• Chief Financial Officer (CFO): Top financial executive overseeing an organization's financial operations.
• Controller: Senior financial accountant managing the accounting department and supporting management with managerial insights.

Continuous Improvement and Organizational Efficiency

• Continuous Improvement: Ongoing effort to enhance processes by reducing waste, improving quality, and increasing efficiency.
• Cost Accounting System: Framework for collecting cost data for managerial and financial accounting purposes.
• Cost Driver: Activity characteristics that lead to cost incurrence, crucial for identifying cost allocation.

Enhancing Performance and Reducing Costs

• Cost Management System (CMS): System focused on measuring significant activity costs and identifying non-value-added expenses to enhance performance.
• Employee Empowerment: Encouraging staff to take initiative in improving operations, focusing on cost reduction and quality enhancement.
• Non-Value-Added Costs: Expenses from activities that do not contribute to product quality or value and can be eliminated.

Accounting Functions and Methodologies

• Financial Accounting: Reporting of accounting information aimed at external stakeholders.
• Internal Auditor: Accountant reviewing internal procedures and reports within the organization.
• Just-in-Time (JIT) System: Inventory approach where materials and products are acquired only as needed, minimizing holding costs.

Organizational Structure

• Line Positions: Roles directly involved in producing goods or services aligned with organizational goals.
• Staff Positions: Managerial roles indirectly involved in production, supporting line positions.

Strategic Management Approaches

• Strategic Cost Management: Understanding and managing cost relationships within the value chain to gain competitive advantage.
• Theory of Constraints: Focuses on identifying and alleviating the limitations that hinder organizational goal achievement.
• Total Quality Management (TQM): Comprehensive approach prioritizing customer satisfaction through quality-focused processes across the organization.

Value Chain Dynamics

• Value Chain: Series of interconnected activities that add value to products and services from initial raw materials to final delivery to customers.

Financial and Asset Management

• Treasurer: Accountant in charge of managing relationships with investors, creditors, and overseeing the organization's cash and assets.

Test your knowledge of key concepts in Managerial Accounting with this Chapter 1 Flashcard quiz. Learn important terms such as activity accounting and activity-based costing (ABC) systems through engaging definitions and examples.