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Zimmerman

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Chapter 1: Introduction Managerial accounting: decision making and control
The internal accounting system, an important component of a firm’s information system, includes budgets, data on the costs of each product and current inventory and periodic financial reports. Internal accounting systems serve two purposes: v Provide some of the knowledge necessary for planning and decision making; v Help motivate and monitor people in organizations (control). The most basic control use of accounting is to prevent fraud and embezzlement.

Design and use of cost systems
An internal accounting system should have the following characteristics: v Provide the information necessary to identify the most profitable products and the pricing and marketing strategies to achieve the desired volume levels; v Provide information to detect production inefficiencies to ensure that the proposed products and volumes are produced at minimum costs; v When combined with the performance evaluation and reward systems, create incentives for managers to maximize firm value; v Support the financial accounting and tax accounting reporting functions; v Contribute more to firm value than it costs.

Economic Darwinism (strong organizations will survive)
Two caveats must be raised concerning too strict an application of economic Darwinism: v Some surviving operating procedures can be neutral mutations. Just because a system survives does not mean that its benefits exceed its costs. Benefits less costs might be close to zero. v Just because a given system survives does not mean it is optimal. A better system might exist but has not yet been discovered.

Management accountant’s role in the organization
We cannot stress the importance of the internal control system too much. The most basic conflicts of interest between employees and owners is theft. To reduce the likelihood of embezzlement, firms

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