managerial accounting
mboaasalep
gnb_15e_01_instructor.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
Copyright © 2015 by McGraw-Hill Education. All rights reserved.
Managerial Accounting:
An Overview
Chapter 1
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Financial and Managerial Accounting: Seven Key Differences
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
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Planning
Establish Goals.
Specify How Goals
Will Be Achieved.
Develop Budgets.
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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.
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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?
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Managerial Accounting Activities:
Marketing Majors
How many salespeople should we plan to hire to serve a new territory?
How much should we budget for TV, print, and internet advertising?
Planning
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Managerial Accounting Activities:
Marketing Majors
Are we accumulating too much inventory during the holiday shopping season?
Is the budgeted price cut increasing unit sales as expected?
Controlling
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Managerial Accounting Activities:
Marketing Majors
Should we sell directly to customers or use a distributor?
Should we sell our services as one bundle or sell them separately?
Decision
Making
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Managerial Accounting Activities:
Supply Chain Management Majors
How much should we budget for next period’s utility expense?
How many units should we plan to produce next period?
Planning
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Managerial Accounting Activities:
Supply Chain Management Majors
Are we achieving our goal of reducing the number of defective units produced?
Did we spend more or less than expected for the units we actually produced?
Controlling
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Managerial Accounting Activities:
Supply Chain Management Majors
Should we redesign our manufacturing process to lower inventory levels?
Should we transfer production of a component part to an overseas supplier?
Decision
Making
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Managerial Accounting Activities:
Human Resource Management Majors
How much should we plan to spend on employee recruitment advertising?
How much should we plan to spend for occupational safety training?
Planning
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Managerial Accounting Activities:
Human Resource Management Majors
Are we meeting our goal of completing timely performance appraisals?
Is our employee retention rate exceeding our goals?
Controlling
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Managerial Accounting Activities:
Human Resource Management Majors
Should we hire temporary workers or full-time employees?
Should we hire an on-site medical staff to lower our healthcare costs?
Decision
Making
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Accounting Majors
Employers expect accounting majors to have strong financial accounting skills, but they also expect application of the planning, controlling, and decision making skills that are the foundation of managerial accounting.
The IMA estimates that more than 80% of professional accountants in the U.S. work in non-public accounting environments.
80%
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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).
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CMA Exam
Information about becoming a CMA and the CMA program can be accessed
on the IMA’s website at www.imanet.org or by calling 1-800-638-4427.
Part 1 Financial Planning, Performance, and Control
Planning, budgeting, and forecasting
Performance management
Cost management
Internal controls
Professional ethics
Part 2 Financial Decision Making
Financial statement analysis
Corporate finance
Decision analysis and risk management
Investment decisions
Professional ethics
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Managerial Accounting: Beyond the Numbers
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.
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Managerial Accounting: Beyond the Numbers
Measurement skills help managers answer important questions.
What net income should my company report to its stockholders?
Measure and report historical data that complies with applicable rules.
How will my company serve its customers?
Measure and analyze mostly non-financial, process-oriented data.
Will my company need to borrow money?
Measure and analyze estimated future cash flows.
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Managerial Accounting: Beyond the Numbers
Six Business Management Perspectives that go beyond the numbers to enable intelligent planning, control, and decision making:
- An Ethics Perspective
- A Strategic Management Perspective
- An Enterprise Risk Management Perspective
- A Corporate Social Responsibility Respective
- A Process Management Prospective
- A Leadership Perspective
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An Ethics Perspective
Competence
Follow applicable
laws, regulations,
and standards.
Maintain professional competence.
Provide accurate, clear, concise, and timely decision support information.
Recognize and communicate professional limitations that preclude responsible judgment.
The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice provides guidelines for ethical behavior.
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Confidentiality
Do not disclose confidential information unless legally obligated to do so.
Ensure that subordinates do not disclose confidential information.
Do not use confidential information for unethical or illegal advantage.
IMA Guidelines for Ethical Behavior
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Mitigate conflicts of interest and advise others of potential conflicts.
Abstain from activities that might discredit the profession.
Refrain from conduct that would prejudice carrying out duties ethically.
Integrity
IMA Guidelines for Ethical Behavior
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Communicate information fairly and objectively.
Disclose all relevant information that could influence a user’s understanding of reports
and recommendations.
Credibility
IMA Guidelines for Ethical Behavior
Disclose delays or deficiencies in information timeliness, processing, or internal controls.
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IMA Guidelines for Resolution of an Ethical Conflict
Follow employer’s established policies.
If this does not work, consider the following:
Discuss the conflict with immediate supervisor or next highest uninvolved managerial level.
If immediate supervisor is the CEO, consider the board of directors or the audit committee.
Contact with levels above the immediate supervisor should only be initiated with the supervisor’s knowledge, assuming the supervisor is not involved.
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IMA Guidelines for Resolution of an Ethical Conflict
If following employer’s established policies for conflict resolution do not work, consider these additional practices:
Except where legally prescribed, maintain confidentiality.
Clarify issues in a confidential discussion with an objective advisor.
Consult an attorney as to legal obligations.
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Why Have Ethical Standards?
Ethical standards in business are essential for a
smooth functioning economy.
Abandoning ethical standards in business would
lead to a lower quality of life with less
desirable goods and services at higher prices.
Without ethical standards in business, the
economy, and all of us who depend on it for
jobs, goods, and services, would suffer.
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A Strategic Management Perspective
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.
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Customer Value Propositions
Understand and respond to
individual customer needs.
Customer
Intimacy
Strategy
Operational
Excellence
Strategy
Deliver products and services
faster, more conveniently,
and at lower prices.
Product
Leadership
Strategy
Offer higher quality products.
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An Enterprise Risk Management Perspective
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?
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An Enterprise Risk Management Perspective
Sheet1
| Examples of Controls to | |||
| Examples of Business Risks | Reduce Business Risks | ||
| ● Intellectual assets stolen from | ● Create firewalls that prohibit com- | ||
| computer files | puter hackers from corrupting or | ||
| stealing intellectual property | |||
| ● Products harming customers | ● Develop a formal and rigorous | ||
| new product testing program | |||
| ● Losing market share due to the | ● Develop an approach for legally | ||
| unforeseen actions of competitors | gathering information about | ||
| competitors' plans and practices | |||
| ● Poor weather conditions shutting | ● Develop contingency plans for | ||
| down operations | overcoming weather-related | ||
| disruptions | |||
| ● Website malfunction | ● Thoroughly test the website | ||
| before going "live" on the Internet | |||
| ● Financial statements unfairly | ● Count the physical inventory on | ||
| reporting the value of inventory | hand to make sure that it agrees | ||
| with the accounting records | |||
| ● An employee accessing | ● Create password-protected barriers | ||
| unauthorized information | that prohibit employees from | ||
| obtaining information not needed | |||
| to do their jobs |
Sheet2
Sheet3
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A Corporate Social Responsibility Perspective
CSR extends beyond legal compliance
to include voluntary actions that satisfy
stakeholder expectations.
Corporate social responsibility (CSR) is a concept
whereby organizations consider the needs
of all stakeholders when making decisions.
Customers
Employees
Communities
Suppliers
Stockholders
Environmental
& Human Rights
Advocates
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Corporate Social Responsibility
Sheet1
| Examples of Corporate Social Responsibility | |||
| Companies should provide customers with: | Companies and their suppliers should provide | ||
| ● Safe, high quality products that are fairly | employees with: | ||
| priced | ● Safe and humane working conditions | ||
| ● Competent, courteous, and rapid delivery | ● Non-discriminatory treatment and the | ||
| of products and services | right to organize and file grievances | ||
| ● Full disclosure of product-related risks | ● Fair compensation | ||
| ● Easy to use information systems for | ● Opportunities for training, promotion, | ||
| shopping and tracking orders | and personal development | ||
| Companies should provide suppliers with: | Companies should provide communities with: | ||
| ● Fair contract terms and prompt payments | ● Payment of fair taxes | ||
| ● Reasonable time to prepare orders | ● Honest information about plans such as | ||
| ● Hassle-free acceptance of timely and | plant closings | ||
| complete deliveries | ● Resources that support charities, schools, | ||
| ● Cooperative rather than unilateral | and civic activities | ||
| actions | ● Reasonable access to media sources | ||
| Companies should provide stockholders with: | Companies should provide environmental | ||
| ● Competent management | and human rights advocates with: | ||
| ● Easy access to complete and accurate | ● Greenhouse gas emissions data | ||
| financial information | ● Recycling and resource conservation data | ||
| ● Full disclosure of enterprise risks | ● Child labor transparency | ||
| ● Honest answers to knowledgeable | ● Full disclosure of suppliers located in | ||
| questions | developing countries | ||
| information not needed to do their | |||
| jobs |
Sheet2
Sheet3
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A Process Management Perspective
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
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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
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Lean Production
Traditional Manufacturing
Produce goods in anticipation of Sales
Make Sales from Finished Goods Inventory
Store
Inventory
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Lean Production
Because lean thinking only allows production in response to customer orders, the number of units produced tends to equal the number of units sold.
The lean approach also results in fewer defects, less wasted effort, and quicker customer response times than traditional production methods.
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A Leadership Perspective
Organizational leaders unite the behavior of employees around two common themes—pursuing strategic goals and making optimal decisions.
Factors that influence behavior:
- Intrinsic Motivation
- Extrinsic Incentives
- Cognitive Bias
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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
Examples of Controls to
Examples of Business RisksReduce Business Risks
● Intellectual assets stolen from ● Create firewalls that prohibit com-
computer files puter hackers from corrupting or
stealing intellectual property
● Products harming customers● Develop a formal and rigorous
new product testing program
● Losing market share due to the ● Develop an approach for legally
unforeseen actions of competitors gathering information about
competitors' plans and practices
● Poor weather conditions shutting ● Develop contingency plans for
down operations overcoming weather-related
disruptions
● Website malfunction● Thoroughly test the website
before going "live" on the Internet
● Financial statements unfairly● Count the physical inventory on
reporting the value of inventory hand to make sure that it agrees
with the accounting records
● An employee accessing● Create password-protected barriers
unauthorized information that prohibit employees from
obtaining information not needed
to do their jobs
Companies should provide customers with:Companies and their suppliers should provide
● Safe, high quality products that are fairlyemployees with:
priced● Safe and humane working conditions
● Competent, courteous, and rapid delivery● Non-discriminatory treatment and the
of products and services right to organize and file grievances
● Full disclosure of product-related risks● Fair compensation
● Easy to use information systems for● Opportunities for training, promotion,
shopping and tracking orders and personal development
Companies should provide suppliers with:Companies should provide communities with:
● Fair contract terms and prompt payments● Payment of fair taxes
● Reasonable time to prepare orders● Honest information about plans such as
● Hassle-free acceptance of timely and plant closings
complete deliveries● Resources that support charities, schools,
● Cooperative rather than unilateral and civic activities
actions● Reasonable access to media sources
Companies should provide stockholders with:Companies should provide environmental
● Competent managementand human rights advocates with:
● Easy access to complete and accurate● Greenhouse gas emissions data
financial information● Recycling and resource conservation data
● Full disclosure of enterprise risks● Child labor transparency
● Honest answers to knowledgeable● Full disclosure of suppliers located in
questions developing countries
Examples of Corporate Social Responsibility
