Unit 1: Discussion
Impaler_2019
Chap001.pptPowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
Managerial Accounting:
An Overview
Chapter 01
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 1: Managerial Accounting: An Overview
This chapter explains why managerial accounting is important to the future careers of all business students. It answers three questions: (1) What is managerial accounting? (2) Why does managerial accounting matter to your career? and (3) What skills do managers need to succeed? It also discusses the importance of ethics in business and corporate social responsibility.
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Financial and Managerial Accounting: Seven Key Differences
What is Managerial Accounting?
There are seven key differences between financial accounting and managerial accounting:
Users: Financial accounting reports are prepared for external parties, whereas managerial accounting reports are prepared for internal users.
Emphasis on the future: Financial accounting summarizes past transactions. Managerial accounting has a strong future orientation.
Relevance of data: Financial accounting data should be objective and verifiable. Managerial accountants focus on providing relevant data even if these data are not completely objective and verifiable.
Less emphasis on precision: Financial accounting focuses on precision when reporting to external parties. Managerial accounting aids decision makers by providing good estimates as soon as possible rather than waiting for precise data later.
Segments of an organization: Financial accounting is concerned with companywide reports. Managerial accounting focuses on the segment reports. Examples of segments include: product lines, sales territories, divisions, departments, etc..
Managerial accounting–no externally imposed rules: Financial accounting conforms to GAAP and IFRS. Managerial accounting is not bound by GAAP and IFRS.
Managerial accounting–not mandatory: Financial accounting is mandatory because various outside parties require periodic financial statements. Managerial accounting is not mandatory.
Sheet1
| Financial Accounting | Managerial Accounting | ||
| 1. Users | External persons who | Managers who plan for | |
| make financial decisions | and control an organization | ||
| 2. Time focus | Historical perspective | Future emphasis | |
| 3. Verifiability | Emphasis on | Emphasis on | |
| versus relevance | objectivity and verifiability | relevance | |
| 4. Precision versus | Emphasis on | Emphasis on | |
| timeliness | precision | timeliness | |
| 5. Subject | Primary focus is on | Focus on | |
| companywide reports | segment reports | ||
| 6. Rules | Must follow GAAP / IFRS | Not bound by GAAP / IFRS | |
| and prescribed formats | or any prescribed format | ||
| 7. Requirement | Mandatory for | Not | |
| external reports | Mandatory |
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Work of Management
Planning
Decision
Making
Controlling
Managerial accounting helps managers carry out three main activities – planning, controlling, and decision making.
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Planning
Establish Goals.
Specify How Goals
Will Be Achieved.
Develop Budgets.
Planning involves establishing goals and specifying how to achieve them. Plans are often accompanied by a budget. A budget is a detailed plan for the future that is usually expressed in formal quantitative terms.
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Controlling
The control function gathers feedback to
ensure that plans are being followed.
Feedback in the form of performance reports
that compare actual results with the budget
are an essential part of the control function.
Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Part of the control process includes preparing performance reports. A performance report compares budgeted to actual results to improve future performance.
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Decision Making
Decision making involves
making a selection among
competing alternatives.
What should
we be selling?
Who should
we be serving?
How should
we execute?
Decision making involves selecting a course of action from competing alternatives.
Many managerial decisions revolve around answering three questions:
a. What should we be selling?
b. Who should we be serving?
c. How should we execute?
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Certified Management Accountant
A management accountant
who has the necessary qualifications
and who passes a rigorous professional
exam earns the right to be known as a
Certified Management Accountant
(CMA).
For accounting majors, the Certified Management Accountant (CMA) designation is a globally-respected credential that will increase your credibility, upward mobility, and compensation.
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Strategic Management Skills
A strategy
is a “game plan”
that enables a company
to attract customers
by distinguishing itself
from competitors.
The focal point of a
company’s strategy should
be its target customers.
A strategy is a “game plan” that enables a company to attract customers by distinguishing itself from competitors.
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Enterprise Risk Management
A process used
by a company to
proactively identify
and manage risk.
Once a company identifies its risks, perhaps the
most common risk management tactic is to reduce
risks by implementing specific controls.
Should I try to avoid the risk, accept the risk, or reduce the risk?
Enterprise risk management is a process used by a company to proactively identify the risks that it faces and manage those risks.
Once a company identifies its risks, perhaps the most common risk management tactic is to reduce risks by implementing specific controls.
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Process Management
A business
process is a series of
steps that are followed in order to
carry out some task in
a business.
Product Customer
R&D Design Manufacturing Marketing Distribution Service
Business functions making up the value chain
A business process is a series of steps that are followed in order to carry out some task in a business.
A value chain consists of the major business functions that add value to a company’s products and services.
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Lean Production
Lean Production is often called Just-In-Time (JIT) production.
Customer places an order
Create Production Order
Generate component requirements
Production begins as parts arrive
Goods delivered when needed
Components are ordered
Lean production is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders.
Lean production is often called just-in-time (JIT) production because products are only made in response to customer orders and they are completed just-in-time to be shipped to customers.
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A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want.
The Theory of Constraints (TOC) is based on the observation that effectively managing the constraint is the key to success.
The constraint in a system is determined
by the step that has the smallest capacity.
Theory of Constraints
A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want. The constraint in a system is determined by the step that has the smallest capacity.
The Theory of Constraints (TOC) is based on the insight that effectively managing the constraint is the key to success. The goal is to manage the constraint with the intent of generating more business rather than cutting the workforce.
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Measurement Skills
A good manager compliments an understanding of strategy, risks, and business processes with data-driven analysis.
The key to effective analysis is to understand that the question you are addressing defines what you measure and how you analyze the data.
The question you are trying to answer defines what you’ll measure and how you analyze it.
Consider the following examples.
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Measurement Skills
Controlling
Planning
Decision
Making
The primary purpose of this course is to teach measurement skills that managers use to support planning, controlling, and decision making activities.
The primary purpose of this course is to teach you measurement skills that managers use every day to support their planning, controlling, and decision making activities.
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End of Chapter 01
End of Chapter 1.
Financial AccountingManagerial Accounting
1. UsersExternal persons whoManagers who plan for
make financial decisionsand control an organization
2. Time focusHistorical perspectiveFuture emphasis
3. VerifiabilityEmphasis onEmphasis on
versus relevanceobjectivity and verifiabilityrelevance
4. Precision versusEmphasis on Emphasis on
timelinessprecisiontimeliness
5. SubjectPrimary focus is onFocus on
companywide reportssegment reports
6. RulesMust follow GAAP / IFRSNot bound by GAAP / IFRS
and prescribed formatsor any prescribed format
7. RequirementMandatory forNot
external reportsMandatory
