Chapter 5 Management Accounting

Chapter 5 Management Accounting

 

5.1 Management Accounting

Managerial accounting, also known as cost accounting, is the process of identifying, measuring, analyzing, interpreting, and communicating information to managers for the pursuit of an organization's goals. The key difference between managerial and financial accounting is managerial accounting information is aimed at helping managers within the organization make decisions, while financial accounting is aimed at providing information to parties outside the organization.

Managerial Accounting

BREAKING DOWN Managerial Accounting

Managerial accounting encompasses all fields of accounting aimed at informing management of business operation metrics. Managerial accountants use information relating to the costs of products or services purchased by the company. Budgets are also extensively used as a quantitative expression of the business’s plan of operation. Individuals in managerial accounting utilize performance reports to note deviations of actual results from budgets.

Margin Analysis

Managerial accounting handles margin analysis to assess profits when weighed against varying types of costs. Margin analysis flows into break-even analysis, which involves calculating the contribution margin on the sales mix to determine the unit volume at which the business’s gross sales equal total expenditures. This information calculated by managerial accountants is useful for determining price points for products and services.

Constraint Analysis

Managerial accounting also manages constraints within a production line or sales process. Managerial accountants determine where principle bottlenecks occur and calculate the impact of these constraints on revenue, profit, and cash flow.

Capital Budgeting

Managerial accounting involves utilizing information related to capital expendituredecisions. Managerial accountants utilize standard capital budgeting metrics, such as net present value and internal rate of return, to assist decision makers on whether to embark on capital-intensive projects or purchases. Managerial accounting involves examining proposals, deciding if the products or services are needed, and finding the appropriate way to finance the purchase. It also outlines payback periods so management is able to anticipate future economic benefits.

Trend Analysis/Forecasting

Managerial accounting involves reviewing the trendline for certain costs and investigating unusual variances or deviations. This field of accounting also utilizes previous period information to calculate and project future financial information. This may include the use of historical pricing, sales volumes, geographical locations, customer tendencies, or financial information.

Product Costing/Valuation

Managerial accounting deals with determining the actual costs of products or services. Managerial accountants calculate and allocate overhead charges to assess the true expenses related to the production of a product. The overhead expenses may be allocated based on the quantity of goods produced or other drivers related to the production, such as the square foot of the facility. In conjunction with overhead costs, managerial accountants use direct costs to properly assess the cost of goods sold and inventory that may be in different stages of production.

For many people, creating and holding a presentation involves a great deal of effort. It even leads to buck fever. To make matters worse, if the presentation has to be given in English, it often entails double the effort for native German speakers. We want to make your next presentation a bit more effortless by introducing the most useful phrases and expressions for an English-language performance.

Presentations have the advantage that many standard phrases can be used at various points. Perhaps you wish to welcome the audience, introduce the speaker and the topic, outline the structure, offer a summary, or deal with questions. In all these situations, you can apply a number of useful expressions that will make your presentation a linguistic success.

WELCOME

At the beginning of each presentation, you should welcome your audience. Depending on who you are addressing, you should extend a more or less formal welcome.

Good morning/afternoon/evening, ladies and gentlemen/everyone.

On behalf of “Company X”, allow me to extend a warm welcome to you.

Hi, everyone. Welcome to “Name of the event”.

INTRODUCING THE SPEAKER

The level of formality of your welcome address will also apply to how you introduce yourself. Customize it to match your audience.

Let me briefly introduce myself. My name is “John Miller” and I am delighted to be here today to talk to you about…

First, let me introduce myself. My name is “John Miller” and I am the “Position” of “Company X”.

I’m “John” from “Company Y” and today I’d like to talk to you about…

INTRODUCING THE TOPIC

After the welcome address and the introduction of the speaker comes the presentation of the topic. Here are some useful introductory phrases.

Today I am here to talk to you about…

What I am going to talk about today is…

I would like to take this opportunity to talk to you about…

I am delighted to be here today to tell you about…

I want to make you a short presentation about…

I’d like to give you a brief breakdown of…

EXPLANATION OF GOALS

It is always recommended to present the goals of your presentation at the beginning. This will help the audience to understand your objectives.

The purpose of this presentation is…

My objective today is…

STRUCTURE

After presenting the topic and your objectives, give your listeners an overview of the presentation’s structure. Your audience will then know what to expect in detail.

My talk/presentation is divided into “x” parts.

I’ll start with…/First, I will talk about…/I’ll begin with…

…then I will look at…

…next…

and finally…

STARTING POINT

After all this preparation, you can finally get started with the main part of the presentation. The following phrases will help you with that.

Let me start with some general information on…

Let me begin by explaining why/how…

I’d like to give you some background information about…

Before I start, does anyone know…

As you are all aware…

I think everybody has heard about…, but hardly anyone knows a lot about it.

END OF A SECTION

If you have completed a chapter or section of your presentation, inform your audience, so that they do not lose their train of thought.

That’s all I have to say about…

We’ve looked at…

So much for…

INTERIM CONCLUSION

Drawing interim conclusions is of utmost importance in a presentation, particularly at the end of a chapter or section. Without interim conclusions, your audience will quickly forget everything you may have said earlier.

To sum up…

Let’s summarize briefly what we have looked at.

Here is a quick recap of the main points of this section.

I’d like to recap the main points.

Well, that’s about it for this part. We’ve covered…

TRANSITION

Use one of the following phrases to move on from one chapter to the next.

I’d now like to move on to the next part…

This leads me to my next point, which is…

Turning our attention now to…

Let’s now turn to…

EXAMPLES

Frequently, you have to give examples in a presentation. The following phrases are useful in that respect.

For example,…

A good example of this is…

As an illustration,…

To give you an example,…

To illustrate this point…

DETAILS

In a presentation, you may often need to provide more details regarding a certain issue. These expressions will help you to do so.

I’d like to expand on this aspect/problem/point.

Let me elaborate further on…

LINKS

If you want to link to another point in your presentation, the following phrases may come in handy.

As I said at the beginning,…

This relates to what I was saying earlier…

Let me go back to what I said earlier about…

This ties in with…

REFERENCE TO THE STARTING POINT

In longer presentations, you run the risk that after a while the audience may forget your original topic and objective. Therefore, it makes sense to refer to the starting point from time to time.

I hope that you are a little clearer on how we can…

To return to the original question, we can…

Just to round the talk off, I want to go back to the beginning when I…

I hope that my presentation today will help with what I said at the beginning…

REFERENCE TO SOURCES

In a presentation, you frequently have to refer to external sources, such as studies and surveys. Here are some useful phrases for marking these references.

Based on our findings,…

According to our study,…

Our data shows/indicates…

GRAPHS AND IMAGES

Presentations are usually full of graphs and images. Use the following phrases to give your audience an understanding of your visuals.

Let me use a graphic to explain this.

I’d like to illustrate this point by showing you…

Let the pictures speak for themselves.

I think the graph perfectly shows how/that…

If you look at this table/bar chart/flow chart/line chart/graph, you can see that…

EMPHASIS

To ensure that your presentation does not sound monotonous, from time to time you should emphasize certain points. Here are some suggestions.

It should be emphasized that…

I would like to draw your attention to this point…

Another significant point is that…

The significance of this is…

This is important because…

We have to remember that…

PARAPHRASE

At times it might happen that you expressed yourself unclearly and your audience did not understand your point. In such a case, you should paraphrase your argument using simpler language.

In other words,…

To put it more simply,…

What I mean to say is…

So, what I’m saying is….

To put it in another way….

QUESTIONS DURING THE PRESENTATION

Questions are an integral part of a presentation. These phrases allow you to respond to questions during a presentation.

Does anyone have any questions or comments?

I am happy to answer your questions now.

Please feel free to interrupt me if you have questions.

If you have any questions, please don’t hesitate to ask.

Please stop me if you have any questions.

Do you have any questions before I move on?

If there are no further questions at this point, I’d like to…

QUESTIONS AT THE END OF A PRESENTATION

To ensure that a presentation is not disrupted by questions, it is advisable to answer questions at the very end. Inform your audience about this by using these phrases.

There will be time for questions at the end of the presentation.

I’ll gladly answer any of your questions at the end.

I’d be grateful if you could ask your questions after the presentation.

INQUIRIES

After answering a question from the audience, check that the addressee has understood your answer and is satisfied with it.

Does this answer your question?

Did I make myself clear?

I hope this explains the situation for you.

UNKNOWN ANSWER

Occasionally, it may happen that you do not have an answer to a question. That is not necessarily a bad thing. Simply use one of the following phrases to address the fact.

That’s an interesting question. I don’t actually know off the top of my head, but I’ll try to get back to you later with an answer.

I’m afraid I’m unable to answer that at the moment. Perhaps, I can get back to you later.

Good question. I really don’t know! What do you think?

That’s a very good question. However, I don’t have any figures on that, so I can’t give you an accurate answer.

Unfortunately, I’m not the best person to answer that.

SUMMARY AND CONCLUSION

At the end of the presentation, you should summarize the important facts once again.

I’d like to conclude by…

In conclusion, let me sum up my main points.

Weighing the pros and cons, I come to the conclusion that…

That brings me to the end of my presentation. Thank you for listening/your attention.

Thank you all for listening. It was a pleasure being here today.

Well, that’s it from me. Thanks very much.

That brings me to the end of my presentation. Thanks for your attention.

HANDING OVER

If you are not the only speaker, you can hand over to somebody else by using one of these phrases.

Now I will pass you over to my colleague ‘Jerry’.

‘Jerry’, the floor is yours.

CONCLUSION

We hope that our article will help you in preparing and holding your next presentation. It goes without saying that our list is just a small extract from the huge world of expressions and phrases. As always, the Internet is an inexhaustible source of further information. Here are the links to two websites that we would recommend to you in this context.

Share:

Read More

Chapter 4 Auditing (Lanjutan)

Chart 1

Chart 2

Chart 3 is an example of a simple bar chart. Bar charts are similar to column charts and are used to present similar types of information but the data is presented in the form of horizontal bars rather than vertical columns, so the years are still the independent variables and therefore are still represented on the x-axis but this is now shown on the vertical axis rather than the horizontal axis.

Chart 3

Charts 4 and 5 are simple line graphs. This is a very common style of graph particularly when showing variation over time. To the reader, these give an indication of moving from one period to the next as the points are connected and for Charts 4 and 5 this gives a good sense of change and can help the reader identify a trend. In fact both of these charts show identical data but due to changes in the y-axis scale, the reader might interpret the information differently.

Chart 4

Chart 5

How will the reader interpret the data in Charts 1–5?
Charts 1 and 3 show identical data presented in similar chart formats (column and bar). Both of these chart types provide the reader with a clear indication of the fairly gradual increasing trend in total sales and with the help of the gridlines, the approximate sales values achieved each year can be read from the chart. This trend may be more visually obvious to the reader in the line graphs shown in Charts 4 and 5. In Chart 4, the vertical y-axis scale begins at zero so the first point plotted appears high on the scale. The reader of this graph may interpret the sales trend as one of fairly gradual and modest growth over the five-year period. Contrast this with the message that is communicated by Chart 5. This chart uses the same data but the message conveyed here is one of sharp increases in the period 2009–2011 and the increase between 2012 and 2013 appears more significant than it did in Chart 4. This is a result of changing the scale so that the vertical axis scale begins at a value just below the first data value. Chart 2 provides the reader with a clear picture of the breakdown of sales by division for one particular year and highlights that the West division makes a much smaller contribution to the total sales than the other three divisions. It is worth noting that some care should be taken when reading the values from a 3D chart of this type. It is the back wall of the column that provides the accurate value. In Chart 2 the sales for North division are actually over $200,000 but if we were to read off from the front wall of the column it would appear that sales are below the $200,000 gridline.

Column, bar and line charts for multiple data sets (Charts 6-8)

Column, bar and line charts can all be used to show multiple data sets provided that the numerical range of the data is similar. (Note that it is possible to plot two sets of data with significantly different data values on the same chart but this type of graph is out of the scope of the syllabus).

Charts 6 and 7 show the data for both total sales and total costs plotted on the same chart, with Chart 6 displaying the data as a column chart and Chart 7 as a line graph. Chart 8 shows the total sales for each of four divisions for each of the five years 2009–2013. Column/bar charts showing multiple data sets are sometimes called compound column/bar charts, though Excel uses the term 'clustered'. Note that in all three of these charts the legend or key becomes an important element of the graph so that the data sets can be distinguished.

Chart 6

Chart 7

Chart 8

How will the reader interpret the data in Charts 6–8?
This type of graph can be used for comparison of the different data sets in absolute value terms and over multiple periods. In Charts 6 and 7, the reader can compare the relationship of total costs to total sales over the five-year period and will notice that in 2012 and 2013 the level of costs compared to sales has increased. In Chart 6 this is clear as the step down between the columns for total sales and total costs has reduced. In Chart 7 the visual representation of the two lines coming closer together makes it particularly clear to the reader that the total costs are rising at a faster rate than total sales. In Chart 8, the reader is faced with a lot of data on one chart with four data sets for each of five years resulting in a total of 20 columns on this chart. While the data presented is still clear, care should be taken not to overload one chart with too much data. The reader can interpret this information by either considering the composition of sales by division for any one year or by selecting each division in turn and considering the change in sales levels for each division over the five-year period. This chart does allow the reader to compare the components of sales each year in actual sales value terms (later we will look at other charts which provide this analysis in percentage terms). Note that this type of chart does not provide the reader with the figure for total sales (unless the reader adds up the totals of the four columns). Chart 8 shows that while the sales of North division have remained fairly constant over the period, there is an upward trend in sales for South and East (except for a small dip in East division sales in 2012) and a downward trend in sales for West division.

Component/stacked column and bar charts (Chart 9)

A component column (or bar) chart, also referred to as a stacked chart, highlights not only an overall total value for multiple time periods (or products, or locations etc), but also provides an analysis of the components of that total. The total figure is represented by the height of the column (or length of the bar), and the column or bar is divided into the various components of the total with each component being identified by different colours, patterns or shading. Pie charts, which will be discussed later, can also show an analysis of a total by its component parts but this can only be shown for one period (or product/location etc) at a time.

Chart 9 is an effective example of this type of stacked column chart. The top of the vertical columns reflect the total sales but the four components shown by the different colours show the changing composition by division of the total sales over the five-year period. The same information could also be presented in the form of a stacked bar chart with the data being represented by component horizontal bars rather than columns.

Chart 9

How will the reader interpret the data in Chart 9?
By reviewing the height of the columns, the reader can clearly identify that there is a trend of gradual growth in total sales over the period 2009–2013. On closer inspection of the components of each of the columns it appears that the level of sales for North Division has remained fairly constant (at just over $200,000) each year while South Division has experienced fairly significant increases in sales each year. East Division also appears to have had increased sales each year, with the exception of 2012. Finally, West Division, which accounts for the smallest level of sales in each of the five years, is actually facing a reduction in its sales over the period. This chart provides useful information for decision making as it highlights both overall figures but also provides useful analysis of the totals by division. The reader may choose to investigate the breakdown further to discover the exact percentage that each component contributes to the overall sales figures.

Pie charts (Charts 10 and 11)

A pie chart also shows the breakdown of the components of a total figure but each pie chart can only show the components of a total for one period (or one product/location etc). To show multiple periods requires multiple pie charts. In preparing a pie chart the charting software will automatically calculate the percentage of each component in relation to the total. The percentages are then shown on a circle or pie with the entire circle representing 100%. This can, of course, be done manually using a protractor to mark the required number of degrees for each segment. As the full circle is 360 degrees then a component that represents a quarter of the total would be drawn as a 90 degrees slice on the pie.

Charts 10 and 11 are examples of simple pie charts showing the breakdown of total sales by division for two years, 2009 and 2013. By comparing the sizes of the slices on the pie (the % values are usually shown on the pie, though these can be shown outside the pie itself or replaced with absolute values) these charts clearly communicate the change in the divisional sales relative to each other over this five year period. Note that there are slight variations in style between the two graphs as the data labels appear on the pie in Chart 10 but are shown as a legend in Chart 11.

Chart 10

Chart 11

How will the reader interpret the data in Charts 10 and 11?
By reviewing the single pie chart for 2013 (Chart 11), the reader can clearly see that North, South and East divisions have all achieved fairly similar levels of sales with South accounting for 34%, North 32% and East 30% of the total sales for the year. It is also immediately obvious that West division at just 4% of the total sales is significantly underperforming compared to the other divisions. Looking at this year in isolation, however, does not give the entire story. Could it be that West is a newly opened division and has yet to make an impact in the market? By looking at the same data for 2009 (Chart 10) and comparing the percentages it is clear that is not the case. In 2009 West contributed 12% of the total sales. That doesn’t necessarily mean that absolute sales of West have fallen (although in fact we know that is the case from the data as it is presented in Charts 8 and 9) but certainly it does mean that as a percentage of the total they have become much less significant. South and East divisions have both increased their share of the total while, like West, North division has also reduced its share of the total from 42% in 2009 to 32% in 2013, although in absolute sales value terms, North’s sales have remained consistent as shown in Charts 8 and 9.

It is important to remember that a pie chart does not show the total values but only a breakdown of those values. It is quite possible that certain components of the pie chart could increase in percentage terms when compared to a similar pie chart for an earlier period but if the overall total had fallen then the absolute number could still be lower.

100% stacked column or bar charts (Charts 12 and 13)

Charts 12 and 13 show 100% stacked (or component) column and bar charts respectively and these provide similar information to that shown in a pie chart as the components of a total can be viewed but the actual total amounts are shown as 100%. This provides similar information to what could be achieved by producing five separate pie charts. Although percentages may not be automatically shown for each component for this type of chart, there is usually an option to allow these percentages to be displayed on the columns or bars.

Chart 12

Chart 13

How will the reader interpret the data in Charts 12 and 13?
Charts 12 and 13 do not provide the reader with any information regarding the level of total sales or total production costs and so it is not possible to comment on any trend as to whether total sales and total costs are rising or falling over this five-year period. They do however provide useful analysis of the breakdown of sales by division (Chart 12) and the breakdown of total production costs by type (Chart 13) over this period and this can be useful information for decision making. We can clearly see from Chart 12 that there has been a gradual change in the composition of sales by division over the period. Again it is important to remember that a falling (or increasing) percentage does not necessarily mean that absolute figures are falling (or increasing). Chart 13 also shows that raw materials, direct labour and production overheads have gradually been accounting for a larger portion of the total costs while non-production costs have significantly reduced as a percentage of the total.

Scatter diagram or XY chart (Charts 14 and 15)

Scatter diagrams can be used to plot two sets of numbers as one series on the chart with one number becoming the x coordinate and the second number becoming the y coordinate. The scatter diagram has two numerical axes representing two variables.

The data provided in the table below has been used to create a scatter diagram showing the relationship between output levels and total costs. Output levels vary each month but some months have the same output level but different costs.

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Output (units)	100	110	90	100	100	130	110	90	120	130	140	100
Total cost ($)	2,500	2,600	2,200	2,600	2,550	3,000	2,650	2,300	2,800	2,900	2,950	2,400

This information has been presented in Chart 14 as a scatter diagram. Notice that the points may be clustered around a particular output level. The scatter diagram points can be used to estimate a trend and a trend line, or line of best fit, can be added to the chart to provide useful information for forecasting as shown in Chart 15.

Chart 14

Chart 15

When data presentation goes wrong

Having considered a variety of charts that present information that aids decision making, it is worth considering some situations where choosing the wrong type of graph, or perhaps an inappropriate scale can produce results that do not provide useful analysis of the data or perhaps even provide incorrect information. To avoid confusion with other appropriate graph types within the article which have been labelled numerically, these inappropriate chart types have been labelled as Charts A through D.

Chart A uses the same data as Chart 2 but the line graph is less effective for this type of information as each division’s performance is not necessarily connected to the previous division’s performance but by connecting the points on the line this graph seems to suggest this type of flow. Notice also that the chart title does not tell the reader what data is being presented (sales/costs/profits?) and the y-axis has no title, so, again, the reader does not know what these figures represent. This is, therefore, an example of a graph which does not communicate information effectively. Chart 2 provides a clearer presentation than Chart A for that particular data set.

Chart A

Chart B is an example of a multiple line chart but here the scaling is a problem. The raw material costs per kg of A fluctuate around $4–5, B costs fluctuate between $6–7 and C between $8–9. In order to show the data for all three materials on the same graph the scale must extend from around $3 up to $9. As a result any small variations in price are not being clearly communicated on this graph. This is therefore an inappropriate graph type for this data. Chart 16 shows a single line chart using the same data but for raw material A only and the reader can now clearly see the fluctuations in the raw material unit cost and consider the impact of this on product costing.
 

Chart B

Chart 16

Chart C is an interesting example. Here, a stacked column chart has been prepared combining the 2 data sets of total sales AND total costs which were shown in Charts 6 and 7. This is in fact an inappropriate chart type for this data. We should ask ourselves, what is the figure called that is the result of adding together total sales plus total costs? This is a meaningless figure and this data should NOT be presented in the form of a stacked column or bar chart. Chart D shows a 100% stacked column chart but like Chart C it is attempting to show a breakdown of a meaningless total figure and so is an inappropriate use of the 100% stacked column chart type. Care must always be taken to select an appropriate chart for the data being presented.

Chart C

Chart D

Conclusion

With so many different types of charts and graphs available (and those shown here are just some of the most commonly used charts), care must always be taken to ensure that an appropriate chart type is chosen to effectively present and communicate the information to the user. We also saw the effects of an inappropriate scale being used in Chart B so even when an appropriate chart type is selected, issues such as scaling, suitable titles and legend types must be carefully considered to ensure effective communication of the data so that it can be interpreted to aid decision making.

Share:

Read More