Accounting for Managers: Interpreting Accounting Information for Decision-Making

Overview

Accounting for Managers, 2nd Edition explains how accounting information is used by non-financial managers. The book emphasizes the interpretation, rather than the construction, of accounting information and encourages a critical, rather than an unthinking acceptance, of the underlying assumptions behind accounting. It links theory with practical examples and case studies drawn from real life business situations in service, retail and manufacturing industries.

...
See more details below
Available through our Marketplace sellers.
Other sellers (Paperback)
  • All (7) from $2.08   
  • New (1) from $61.21   
  • Used (6) from $2.08   
Close
Sort by
Page 1 of 1
Showing All
Note: Marketplace items are not eligible for any BN.com coupons and promotions
$61.21
Seller since 2008

Feedback rating:

(214)

Condition:

New — never opened or used in original packaging.

Like New — packaging may have been opened. A "Like New" item is suitable to give as a gift.

Very Good — may have minor signs of wear on packaging but item works perfectly and has no damage.

Good — item is in good condition but packaging may have signs of shelf wear/aging or torn packaging. All specific defects should be noted in the Comments section associated with each item.

Acceptable — item is in working order but may show signs of wear such as scratches or torn packaging. All specific defects should be noted in the Comments section associated with each item.

Used — An item that has been opened and may show signs of wear. All specific defects should be noted in the Comments section associated with each item.

Refurbished — A used item that has been renewed or updated and verified to be in proper working condition. Not necessarily completed by the original manufacturer.

New

Ships from: Chicago, IL

Usually ships in 1-2 business days

  • Standard, 48 States
  • Standard (AK, HI)
Page 1 of 1
Showing All
Close
Sort by
Sending request ...

Overview

Accounting for Managers, 2nd Edition explains how accounting information is used by non-financial managers. The book emphasizes the interpretation, rather than the construction, of accounting information and encourages a critical, rather than an unthinking acceptance, of the underlying assumptions behind accounting. It links theory with practical examples and case studies drawn from real life business situations in service, retail and manufacturing industries.

Read More Show Less

Product Details

  • ISBN-13: 9780470845028
  • Publisher: Wiley, John & Sons, Incorporated
  • Publication date: 4/22/2003
  • Edition number: 1
  • Pages: 494
  • Product dimensions: 6.65 (w) x 9.70 (h) x 1.11 (d)

Meet the Author

Paul M. Collier is senior lecturer at Monash University in Australia and was previously senior lecturer in management accounting at Aston Business School in Birmingham. Having also worked in senior financial and general management positions in the UK and Australia, this book is a result of his practical experience as a producer and user of accounting information as well as his teaching and training experience.

Read More Show Less

Read an Excerpt

Accounting for Managers

Interpreting Accounting Information for Decision-Making
By Paul M. Collier

John Wiley & Sons

ISBN: 0-470-84502-3


Chapter One

Introduction to Accounting

This chapter introduces accounting and provides a short history of management accounting. It describes the early role of the management accountant and recent developments that have influenced the role of non-financial managers in relation to the use of financial information. The chapter concludes with a critical perspective on accounting history.

Accounting, accountability and the account

Businesses exist to provide goods or services to customers in exchange for a financial reward. Public-sector and not-for-profit organizations also provide services, although their funding comes not from customers but from government or charitable donations. While this book is primarily concerned with profit-oriented businesses, most of the principles are equally applicable to the public and not-for-profit sectors. Business is not about accounting. It is about markets, people and operations (the delivery of products or services), although accounting is implicated in all of these decisions because it is the financial representation of business activity.

The American Accounting Association defined accounting in 1966 as:

The process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of theinformation.

This is an important definition because:

it recognizes that accounting is a process: that process is concerned with capturing business events, recording their financial effect, summarizing and reporting the result of those effects, and interpreting those results (we cover this in Chapter 3);

it is concerned with economic information: while this is predominantly financial, it also allows for non-financial information (which is covered in Chapter 4);

its purpose is to support 'informed judgements and decisions' by users: this emphasizes the decision usefulness of accounting information and the broad spectrum of 'users' of that information. While the primary concern of this book is the use of accounting information for decision-making, the book takes a stakeholder perspective that users of accounting information include all those who may have an interest in the survival, profitability and growth of a business: shareholders, employees, customers, suppliers, financiers, government and society as a whole.

The notion of accounting for a narrow (shareholders and financiers) or a broad (societal) group of users is an important philosophical debate to which we will return throughout this book. This debate derives from questions of accountability: to whom is the business accountable and for what, and what is the role of accounting in that accountability?

Boland and Schultze (1996) defined accountability as:

The capacity and willingness to give explanations for conduct, stating how one has discharged one's responsibilities, an explaining of conduct with a credible story of what happened, and a calculation and balancing of competing obligations, including moral ones. (p. 62)

Hoskin (1996) suggested that accountability is:

more total and insistent ... [it] ranges more freely over space and time, focusing as much on future potential as past accomplishment. (p. 265)

Boland and Schultze argued that accountability entails both a narration of what transpired and a reckoning of money, both meanings deriving from the original meanings of the word account.

Accounting is a collection of systems and processes used to record, report and interpret business transactions. Accounting provides an account - an explanation or report in financial terms - about the transactions of an organization. It enables managers to satisfy the stakeholders in the organization (owners, government, financiers, suppliers, customers, employees etc.) that they have acted in the best interests of stakeholders rather than themselves. This is the notion of accountability to others, a result of the stewardship function of managers that takes place through the process of accounting. Stewardship is an important concept because in all but very small businesses, the owners of businesses are not the same as the managers. This separation of ownership from control makes accounting particularly influential due to the emphasis given to increasing shareholder wealth (or shareholder value). Accountability results in the production of financial statements, primarily for those interested parties who are external to the business. This function is called financial accounting.

Accounting is traditionally seen as fulfilling three functions:

Scorekeeping: capturing, recording, summarizing and reporting financial performance.

Attention-directing: drawing the attention of managers to, and assisting in the interpretation of, business performance, particularly in terms of the comparison between actual and planned performance.

Problem-solving: identifying the best choice from a range of alternative actions.

In this book, we acknowledge the role of the scorekeeping function in Chapters 6 and 7, while emphasizing attention-directing and problem-solving as taking place through three inter-related functions, all part of the role of functional as well as financial managers:

Planning: establishing goals and strategies to achieve those goals.

Decision-making: using financial information to make decisions consistent with those goals and strategies.

Control: using financial information to maintain performance as close as possible to plan, or using the information to modify the plan itself.

Planning, decision-making and control are particularly relevant as increasingly businesses have been decentralized into many business units, where much of the planning, decision-making and control is focused. Managers need financial and non-financial information to develop and implement strategy by planning for the future (budgeting); making decisions about products, services, prices and what costs to incur (decision-making using cost information); and ensuring that plans are put into action and are achieved (control). This function is called management accounting.

This book is primarily concerned with the planning, decision-making and control aspects, i.e. management accounting. However, it begins by setting the role of the manager and the use of accounting information in the context of financial accounting.

A short history of accounting

The history of accounting is intertwined with the development of trade between tribes and there are records of commercial transactions on stone tablets dating back to 3600 BC (Stone, 1969). The early accountants were 'scribes' who also practised law. Stone (1969) noted:

In ancient Egypt in the pharaoh's central finance department ... scribes prepared records of receipts and disbursements of silver, corn and other commodities. One recorded on papyrus the amount brought to the warehouse and another checked the emptying of the containers on the roof as it was poured into the storage building. Audit was performed by a third scribe who compared these two records. (p. 284)

However, accounting as we know it today began in the fourteenth century in the Italian city-states of Florence, Genoa and Venice as a result of the growth of maritime trade and banking institutions. The first bank with customer facilities opened in Venice in 1149. The Lombards were Italian merchants who were established as moneylenders in England at the end of the twelfth century.

Balance sheetswere evident from around 1400 and the Medici family (who were Lombards) had accounting records of 'cloth manufactured and sold'. The first treatise on accounting (although it was contained within a book on mathematics) was the work of a monk, Luca Pacioli, in 1494. The first professional accounting body was formed in Venice in 1581.

Much of the language of accounting is derived from Latin roots. 'Debtor' comes from the Latin debitum, something that is owed; 'assets' from the Latin ad + satis, to enough, i.e. to pay obligations; 'liability' from ligare, to bind; 'capital' from caput, a head (of wealth). Even 'account' derives initially from the Latin computare, to count, while 'profit' comes from profectus, advance or progress. 'Sterling' and 'shilling' came from the Italian sterlino and scellino, while the pre-decimal currency abbreviation 'LSD' (pounds, shillings and pence) stood for lire, soldi, denarii.

Chandler (1990) traced the development of the modern industrial enterprise from its agricultural and commercial roots as a result of the Industrial Revolution in the last half of the nineteenth century. By 1870, the leading industrial nations - the United States, Great Britain and Germany - accounted for two-thirds of the world's industrial output. One of the consequences of growth was the separation of ownership from management. Although the corporation, as distinct from its owners, had been in existence in Britain since 1650, the separation of ownership and control was enabled by the first British Companies Act, which formalized the law in relation to 'joint stock companies' and introduced the limited liability of shareholders during the 1850s. The London Stock Exchange had been formed earlier in 1773 by stockbrokers, who had previously worked from coffee houses.

The second consequence of growth was the creation of new organizational forms. Based on his extensive historical analysis, Chandler (1962) found that in large firms structure followed strategy and strategic growth and diversification led to the creation of decentralized, multidivisional corporations like General Motors, where remotely located managers made decisions on behalf of absent owners and central head office functions. Ansoff (1988) emphasized that success in the first 30 years of the mass-production era went to firms that had the lowest prices. However, in the 1930s General Motors 'triggered a shift from production to a market focus' (p. 11).

In large firms such as General Motors, budgets were developed to co-ordinate diverse activities. In the first decades of the twentieth century, the DuPont company developed a model to measure the return on investment (ROI). ROI (see Chapters 7, 12 and 13) was used to make capital investment decisions and to evaluate the performance of business units, including the managerial responsibility to use capital efficiently.

The role of management accounting

The advent of mechanized production following the Industrial Revolution increased the size and complexity of production processes, which employed more people and required larger sums of capital to finance machinery. Accounting historians suggest that the increase in the number of limited companies that led to the separation of ownership from control caused the attention of cost accounting to shift from determining cost to exercising control by absent owners over their managers.

The predecessor of management accounting, 'cost accounting', was reflected in the earlier title of management accountants as cost or works accountants. Typically situated in factories, these accountants tended to know the business and advise non-financial managers in relation to operational decisions. Cost accounting was concerned with determining the cost of an object, whether a product, an activity, a division of the organization or market segment. The first book on cost accounting is believed to be Garcke and Fell's Factory Accounts, which was published in 1897.

Historians have argued that the new corporate structures that were developed in the twentieth century - multidivisional organizations, conglomerates and multinationals - placed increased demands on accounting. These demands included divisional performance evaluation and budgeting. It has also been suggested that developments in cost accounting were driven by government demands for cost information during both World Wars. It appears that 'management accounting' is a term used only after the SecondWorld War.

In their acclaimed book Relevance Lost, Johnson and Kaplan (1987) traced the development of management accounting from its origins in the Industrial Revolution supporting process-type industries such as textile and steel conversion, transportation and distribution. These systems were concerned with evaluating the efficiency of internal processes, rather than measuring organizational profitability. Financial reports were produced using a separate transactions-based system that reported financial performance. Johnson and Kaplan (1987) argued that by 1925 'virtually all management accounting practices used today had been developed' (p. 12).

They also described how the early manufacturing firms attempted to improve performance via economies of scale by reducing unit cost through increasing the volume of output. This led to a concern with measuring the efficiency of the production process. Calculating the cost of different products was unnecessary because the product range was homogeneous.

Over time, the product range expanded and businesses sought economies of scope through producing two or more products in a single facility. This led to the need for better information about how the mix of products could improve total profits. However, after 1900 the production of accounting information was largely for external reporting to shareholders and not to assist managerial decision-making.

Johnson and Kaplan (1987) described how a management accounting system must provide timely and accurate information to facilitate efforts to control costs, to measure and improve productivity, and to devise improved production processes. The management accounting system must also report accurate product costs so that pricing decisions, introduction of new products, abandonment of obsolete products, and response to rival products can be made. (p. 4)

The Chartered Institute of Management Accountants' definition of the core activities of management accounting includes:

participation in the planning process at both strategic and operational levels, involving the establishment of policies and the formulation of budgets;

the initiation of and provision of guidance for management decisions, involving the generation, analysis, presentation and interpretation of relevant information;

contributing to the monitoring and control of performance through the provision of reports including comparisons of actual with budgeted performance, and their analysis and interpretation.

One of the earliest writers on management accounting described 'different costs for different purposes' (Clark, 1923). This theme was developed by one of the earliest texts on management accounting (Vatter, 1950).

Continues...


Excerpted from Accounting for Managers by Paul M. Collier Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Read More Show Less

Table of Contents

Preface
Acknowledgements
About the Author
Pt. I Context of Accounting 1
1 Introduction to Accounting 3
2 Accounting and its Relationship to Shareholder Value and Business Structure 13
3 Recording Financial Transactions and the Limitations of Accounting 25
4 Management Control, Management Accounting and its Rational-Economic Assumptions 37
5 Interpretive and Critical Perspectives on Accounting and Decision-Making 55
6 Constructing Financial Statements and the Framework of Accounting 67
Pt. II Using Accounting Information for Decision-Making, Planning and Control 81
7 Interpreting Financial Statements and Alternative Theoretical Perspectives 83
8 Marketing Decisions 103
9 Operating Decisions 121
10 Human Resource Decisions 141
11 Accounting Decisions 155
12 Strategic Investment Decisions 181
13 Performance Evaluation of Business Units 195
14 Budgeting 207
15 Budgetary Control 225
Pt. III Supporting Information 245
16 Research in Management Accounting, Conclusions and Further Reading 247
17 Introduction to the Readings 253
Glossary of Accounting Terms 369
App Questions and Case Studies 381
Author Index 467
Subject Index 469
Read More Show Less

Customer Reviews

Be the first to write a review
( 0 )
Rating Distribution

5 Star

(0)

4 Star

(0)

3 Star

(0)

2 Star

(0)

1 Star

(0)

Your Rating:

Your Name: Create a Pen Name or

Barnes & Noble.com Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & Noble.com that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & Noble.com does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at BN.com or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation

Reminder:

  • - By submitting a review, you grant to Barnes & Noble.com and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Noble.com Terms of Use.
  • - Barnes & Noble.com reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & Noble.com also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on BN.com. It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

 
Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously

    If you find inappropriate content, please report it to Barnes & Noble
    Why is this product inappropriate?
    Comments (optional)