Unit 1 Lecture

This unit explores the general business environment, in the Prologue, and the reason for the existence of managerial accounting in Chapter 1. Managers are in need of information. Managerial accounting is the vehicle that satisfies that need. Without reasonable, valid, timely information companies will always be at a disadvantage when it comes to competing in the marketplace.

Managers use the provided information to carry out three major activities: planning, directing and motivating, and controlling

Planning involves the identification of alternative business plans. The plans that are most beneficial to the company should be reviewed and implemented if feasible. The implementation process involves budgets. Budgets are prepared under the direction of a controller, a manager in charge of the accounting department. Typically, budgets are prepared annually. We will learn more about budgets in chapter 7.

Besides analyzing business alternatives managers must direct and motivate employees. As we know, unhappy, unguided employees can be detrimental to a business. I have worked for companies where one employee would stifle other employees to the point where he had to be fired. Productivity is paramount to profitability. In addition to managing personnel, managerial must keep the company running in an orderly fashion by analyzing daily sales reports, among other reports, to ensure there are no bottlenecks in production, falling sales within certain product groups, etc….Identification of such problems would lead to actions to resolve the issues.

Controlling involves making sure the plan is being followed. Feedback is key to effective control. As the book points out, performance reports are part of feedback. How managers use these reports could determine how a successful a company can be. Imagine a manger looking at a performance report and