Managerial Accounting and the Business Environment
1. Determine the impact of the 4 C’s of marketing to the business enterprise.
A. Customer – Business entity are created to satisfy all the needs and wants of the people; these people are called customers. It plays a vital role in every business, because every individual is considered as customer in their own way. Maximizing profit is one of the goals of every business, in order to do it you must caters lot of market, consist of different people. Businesses are made to operate to earn money, this money are provided by its customer. So that I can say that business entity exists because of their customers. Without customers, there we’re no business.
B. Convenience – the customer will be more satisfying if the business enterprise is convenient to them. You may have a possibility on outcoming your competitors because of the convenience that the customers are experiencing using and availing your product. Convenience is all about accessibility and effective consumption of the product. Which means being convenient can affect the performance of your business. It may tell if you have a competitive advantage within your competition, based on the results of your sales performance.
C. Cost – the cost of the product will determine how large may your sales can be. The amount of the price of the product depends on how much the cost of its production. In order to start a manufacturing business or any business, you must always do the costing. This will determine how much the amount of the product when it’s made or purchase. This will be the basis of the price on how business offers their product, and can serve as manifestation of your income.
D. Communication – Communication falls on how you inform your customers about your product. It is very vital in a business enterprise. Promotion is one way of communicating to your customers. You can easily tell them what are the characteristics of your product, where it can be made, effects and benefits, how it should be use, and the price itself. Good communication can boost the performance of your company, it can also increase your sales, and build a strong brand name.
2. How can business re-engineering be applied in practice?
• Business re-engineering is a process where in you will review and analyze all the performance of your company, same as the risk. You will do this in order to improve the internal aspect of your company. This includes all the workflows and business processes within the organization. This can protect all the company’s asset. Business re-engineering can be done by reviewing the current state of the business and determine if there are gaps that need to be change. By this you can start to redesign your core values or processes to improve your business productivity. Make sure that every update you will do, will increase the effectiveness and efficiency of the performance of every employee to achieve your business goals and success.
3. Evaluate the relationship if internal control in understanding business process management.
• Business process management ensures the systematic workflow of the organization, and under this is the internal control. Internal control plays a vital role in business, it ensures the safety of the entire company’s assets. So that if there are lots of risk factors in business process, like risk given by external forces such as technology, or weather, it will have a big impact to the internal control as it may serves as a threat to the company’s assets.
4. Explain which accounting reports are being accumulated and reported decision maker’s consumption.
• Accounting reports are the compilation of the financial statements from the accounting records of the business. These financial statements or records are kept for the comparison of the performance of the business, and serve as a basis for decision making. these reports are; statement of comprehensive income, changes in equity, financial position, and cash flow. These four reports represent the performance of the business in their respective classification for the entire year.
• Statement of comprehensive income is use to determine all the income that the business gather for the entire year, and compare it to the total expenditure. This will show if your company has a net income or net loss for a period of time. Statement of changes in equity is all about the change in the value of owner’s capital such as the income and investments.
Statement of financial position shows all the liability, equity, and asset of the entire organization. If this report did not balance, it only means that something is wrong. And last is the cash flow statement, it shows the cash flow of the entire business in terms of financing, investing, and operating.
5. Distinguish the various opinions issued by auditors on the financial statements being examined.
• Unqualified Opinion – it is an independent auditor’s opinion that a company’s financial statements are fairly and appropriately presented, without any identified exemptions.
• Qualified Opinion – an auditor’s opinion that the financial statement is fairly presented, with the exception of a specific area. For instance, the accountant made some changes of discover some errors in the financial statement.
• Adverse opinion – it is when the accountant discover that the financial statement are misrepresent, and not accurately reflect the business financial status.
• Disclaimer opinion – is used when there is no opinions and classification done by the accountants.
6. What are the common reasons for business failure and relate it with what you have learn in this chapter.
• Business usually failed because they know little in properly run their money, or manage the business as a whole. They disregard the value of 4C’s or I might say that they don’t know how to give importance to it. some of them focus only on getting profit while disregarding the business processes which is more important. They decide so easily like they are not considering many factors. There are lots of basis that is not really considered because they forgot the foundation of their business. They are stock on what they are doing for couples of decades like continuing what they are doing every day, they did not seek improvements. They are not doing renovation, not coping up to the advancement of the technology, where in we can do lots of process accurately and faster compare than before. Some business stick to traditional computation, and decide not to use technological advancement in their method of accounting, it can result to slow business process, and sometimes it can lead to misinterpretation of data. This can affect the decision making of the company, because they relied on wrong data that limits their business to growth, that stops them to achieve success.
7. Differentiate decision makers that use financial report and decision makers that do not use financial report to support their decision.
• Decision makers who use financial report will come up to more accurate and effective plan on getting their goals in the future. Their decision is based on facts and numerical data derive from the financial reports. This can lead to more precise plan that can lead to success. While the decision makers who do not use financial reports in having a decision will not have basis from their decision, they decide with pure instinct and gamble a lot, and wait to have progress through luck, will not ensure the success of their business enterprise.
Roles, Historical perspective and direction of Management Accounting
1. Differentiate the internal users from externa users of financial statements.
a. External users – these users are of financial statements are person that is not belong to the business or organization like investors, creditors and government. They use this opportunity to look at the financial statement to see the process perform by the company. But they have different purpose on checking the financial statement. The investors check this for basis if the company is suitable for investment. Creditor look at the financial statement to verify if the business has the capacity to pay them. And the government look at the financial statement to see the tax they should pay.
b. Internal users – these users are, users that belong or member of the business or organization, such as the owner of the company, board of directors, managers, and auditors. They use it to supervise and monitor the performance of the company. And also, to use whether they should change processes or not.
2. Compare financial accounting from managerial accounting.
• Financial accounting is presented for the external users, it is a general purpose of financial statement, it uses a numerical form in order to distinguish profitability of the company to use as basis for investments and for credit. This report contains of precise data about the performance of the company all throughout the year. It is the report of overall financial performance of the whole organization, and it should follow to the general accepted principle of accounting.
• Managerial accounting, is for internal users only. Its purpose is to managing personnel and preparation for the management for the whole year. This report can be the basis of planning, directing, and controlling which is core value of a manager. compared to financial accounting, this form of accounting aims to improve the flaws of internal users. They find what’s lack on different department and find ways to solve it. This report shows all the comparison of past transaction up to the present to compare what the company is lacking. If the financial accounting focus on the general, the managerial accounting focus only to the financial transaction inside the company.
3. how do objectives of management accounting contribute to the success of business operations?
a. Performance measurement – this is the assessment of the performance of officials and workers. The management accounting is responsible for assisting managers on analyzing data. They can ensure to assess all the processes of the company, because they are the on who can interpret the numerical data that is provided by the financial report. This report will manifest the performance of every department, they can easily see the issue on the performance of the worker, and be able to find specific solution.
b. Risk measurement- The management accounting has the ability to see the possible risk happens in everyday operations, from this they can start to analyze what is the risk and formulate effective strategy in order to overcome it easily.
c. Right allocation of Business Resources - Management accountant is responsible on allocating business resources. So, studying financial reports will help you analyze what’s needing more resources and less resources. With this you can allocate the right materials on its right place with ease. You don’t have to waste lots of materials and have an emergency shortage.
d. Timely presentation of financial statements – as management accountants relied financial reports, they also ensure that the data needed will be submitted on time. Because it is the basis of the decision making perform by the managers. Financial flow or cash flow happens every time. The managers must always monitor the change in financial movement, to maintain transparency and to perform immediate aid for the sudden failure.
4. Evaluate the limitations of management accounting in reducing risk of business failures.
a. Historical data- it is a weakness of a management accounting because they are only relying on the historical data presented in the financial accounting.
b. Responsible in decision making only- they are assisting the managers in the decision-making activities, but not really responsible in controlling the decisions.
c. Relies on a tools and techniques in decision making serves as a support for decision making only.
d. They are using their own judgements, therefor it does not guarantee of success but a chance to success only.
5. How does ethical standards violation work in practice of management accounting? How does it affect the practitioner?
If the management accountants want to join as part of the management team, he should be a person of integrity, have self-confidence, and competence and have strict confidentiality. But practicing management consulting held more for management accountants. His task is not only as assistant but also have the obligation for planning, supervising, and control of the decisions therefor he must be good in communicating in order to explain to the client all the necessary data needed, and to ensure that they understand it as clearly as possible. If the managers violate those ethical standards the practitioner will lost their trust to the person and he cannot be held responsible and give an assurance that he can do his job properly, or keep the information about the company. His words and identity will not be trustworthy to rely when in terms of decision making.
