Chapter 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment
Learning Objective 1
Learning Objective 1
Define Managerial Accounting
Managerial accounting is the process of Identifying Measuring Analyzing Interpreting Communicating information
Learning Objective 2
Managing Resources, Activities, and People An organization . . . Directing
Acquires Resources
Decision Making
Organized set of activities
Controlling
Hires People
Planning
Learning Objective 3
How Managerial Accounting Adds Value to the Organization • Providing information for decision making and planning. • Assisting managers in directing and controlling activities. • Motivating managers and other employees towards organization’s goals. • Measuring performance of subunits, activities, managers, and other employees. • Assessing the organization’s competitive position.
The Balanced Scorecard How do we look to owners?
Financial Perspective Goals Measures
Customer Perspective Goals Measures
In which activities must we excel?
Operations Perspective Goals Measures
How do customers see us? Innovation Perspective Goals Measures
How can we continue to improve?
Learning Objective 4
Managerial versus Financial Accounting Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Managerial Accounting Information for decision making, planning, and controlling an organization’s operations. Internal Users
Financial Accounting Published financial statements and other financial reports.
External Users
Managerial versus Financial Accounting Managerial Accounting
Financial Accounting
Users of Information Managers, within the organization. Regulation Not required and unregulated, since it is intended only for management.
Interested parties, outside the orga Required and must conform to generally ac c epted ac c ounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. Source of Data The organization's basic Almost exclusively drawn from the accounting system, plus various organization's basic accounting other sources, suc h as rates of syst em, which ac c umulates effec tive produc ts manufac tured, financial information. physical quantities of material and labor used in production, occ upancy rates in hotels and hospitals, and average take-off delays Nature of Reports Reports often focus on subunits Reports focus on the enterprise in and Procedures within the organization, such as its entirety. Based almost departments, divisions, exclusively on historical geographical regions, or product transaction data. lines. Based on a combination of
Learning Objective 5
Line and Staff Positions • A line position is directly involved in achieving the basic objectives of an organization. – Example: A production supervisor in a manufacturing plant.
• A staff position supports and assists line positions. – Example: A cost accountant in the manufacturing plant.
Learning Objective 6
Controller The chief managerial and financial accountant responsibility for: – Supervising accounting personnel – Preparation of information and reports, managerial and financial – Analysis of accounting information – Planning and decision making
Treasurer Responsible for raising capital and safeguarding the organization’s assets. – Supervises relationships with financial institutions. – Work with investors and potential investors. – Manages investments. – Establishes credit policies. – Manages insurance coverage
Internal Auditor Responsible for reviewing accounting procedures, records, and reports in both the controller’s and the treasurer’s area of responsibility. – Expresses an opinion to top management regarding the effectiveness of the organizations accounting system.
Learning Objective 7
Major Themes in Managerial Accounting Behavioral Issues
Costs and Benefits
Information and Incentives
Evolution and Adaptation
Managerial Accounting
Evolution and Adaptation in Managerial Accounting E-Business Service vs. Manufacturing Firms
Emergence of New Industries Global Competition Focus on the Customer Cross-Functional Teams
Product Life Cycles Time-Based Competition Information and Communication Technology Just-in-Time Inventory Total Quality Management Continuous Improvement
Cost Management Systems Objectives Measure the cost of resources consumed. Identify and eliminate non-value-added costs.
Cost Management System
Cost Management Systems Objectives Determine efficiency and effectiveness of major activities. Identify and evaluate new activities that can improve performance.
Cost Management System
Learning Objective 8
Strategic Cost Management and the Value Chain Product Design Production Research and Development Securing raw materials and other resources
Start
Marketing
Distribution Customer Service
Theory of Constraints A sequential process of identifying and removing constraints in a system. Restrictions or barriers that impede progress toward an objective
Learning Objective 9
Ethical Climate of Business The corporate scandals experienced over the last few years have shown us that unethical behavior in business is wrong in a moral sense and can be disastrous in the economy. In addition to Sarbanes-Oxley, there will likely be more reforms in corporate governance and accounting.
Learning Objective 10
Managerial Accounting as a Career Professional Organizations Institute of Management Accountants (IMA)
Publishes Management Accounting and research studies.
Administers Certified Management Accountant program
Develops Standards of Ethical Conduct for Management Accountants
Professional Ethics Competence Confidentiality Integrity Credibility
