Introduction to managerial accounting

Published on January 31, 2018   15 min
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Hello everyone. I would like to welcome you to this H S talks lecture series on Managerial Accounting. My name is Alexander Himme and I'm the Assistant Professor for Managerial Accounting at the Kuhne Logistics University in Hamburg, Germany.
In this first module, we will talk about what is Managerial Accounting and why it's important. In order to do that, we will define what accounting is about in general, followed by a very important distinction between Financial Accounting and Managerial Accounting.
Let us take a look at some typical situations where accounting becomes relevant. For example, you want to buy stocks from a company. How do you make such a decision? Hopefully, not just based on your gut feelings but based on the economic information that is provided by the company. As a potential investor of the company, you would like to know something about the profitability of that company before you invest. Let's look at another example. You want to apply for a bank loan. What will the bank do? Of course, bank would ask you to provide economic information to assess your credit worthiness. Another example. You have a great business idea in mind and plan to form a startup. A typical question that you will ask yourself at the beginning will be, how many units of a great new product do you have to sell to break-even? The break-even point is number of units where your new start up turns from the loss zone to the profit zone. In other words, where total revenues equal total costs. We'll talk about break-even analysis in module number six. Lastly, you are the manager in a company and you are responsible for the production of a certain product that needs many different components. For instance, a car or a computer. A typical decision you always have to make in this context is the make or buy decision or also called the outsourcing decision. That is a decision regarding the question, which of the components will you produce in-house and which components do you want to source from outside suppliers? Again, hopefully, you as a manager will not make such decisions based on your gut feelings but based on economic information. In this case, you will have to focus on the relevant costs and revenues that are involved in the context of such a decision. We will talk about relevant costs and revenues and how to make such a decision in module number eight.