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Chapter 1Chapter 1
The Changing Role of Managerial
Accounting in a Dynamic Business
Environment
The Changing Role of Managerial
Accounting in a Dynamic Business
Environment
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning Objective
1
Learning Objective
1
1-2
Managerial accounting is the process of Identifying Measuring Analyzing Interpreting Communicating information
Define Managerial AccountingDefine Managerial Accounting
1-3
Learning Objective
2
Learning Objective
2
1-4
Managing Resources, Activities, Managing Resources, Activities, and Peopleand People
An organization . . .
Acquires Resources
Hires People
Organized setOrganized setof activitiesof activities
Organized setOrganized setof activitiesof activities
DecisionMaking
DecisionMaking
PlanningPlanning
DirectingDirecting
ControllingControlling
1-5
Learning Objective
3
Learning Objective
3
1-6
How Managerial Accounting How Managerial Accounting Adds Value to the OrganizationAdds 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.
• 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.
1-7
The Balanced ScorecardThe Balanced ScorecardFinancial Perspective
Goals Measures
Customer PerspectiveGoals Measures
Operations PerspectiveGoals Measures
Innovation PerspectiveGoals Measures
How do we look to
owners?
How do customers
see us?How can we continue to improve?
In which In which activities activities must we must we excel?excel?
1-8
Learning Objective
4
Learning Objective
4
1-9
Managerial versus Financial Managerial versus Financial AccountingAccountingAccounting SystemAccounting System
(accumulates financial and(accumulates financial andmanagerial accounting data in the managerial accounting data in the
cost accounting system)cost accounting system)
Accounting SystemAccounting System(accumulates financial and(accumulates financial and
managerial accounting data in the managerial accounting data in the cost accounting system)cost accounting system)
Managerial AccountingManagerial AccountingInformation for decisionInformation for decisionmaking, planning, and making, planning, and
controlling an controlling an organization’sorganization’s
operations.operations.
Managerial AccountingManagerial AccountingInformation for decisionInformation for decisionmaking, planning, and making, planning, and
controlling an controlling an organization’sorganization’s
operations.operations.
Financial AccountingFinancial AccountingPublished financialPublished financial
statements and otherstatements and otherfinancial reports.financial reports.
Financial AccountingFinancial AccountingPublished financialPublished financial
statements and otherstatements and otherfinancial reports.financial reports.
InternalInternalUsersUsers
ExternalExternalUsersUsers
1-10
Managerial versus Financial Managerial versus Financial AccountingAccounting
Managerial Accounting Financial AccountingUsers of Information
Managers, within the organization. Interested parties, outside the organization.Regulation Not required and unregulated,
since it is intended only for management.
Required and must conform to generally accepted accounting 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 accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take- off delays
Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information.
Nature of Reports and Procedures
Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and
Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data.
1-11
Learning Objective
5
Learning Objective
5
1-12
• A staff position supports and assists line positions.
– Example: A cost accountant in the manufacturing plant.
• A staff position supports and assists line positions.
– Example: A cost accountant in the manufacturing plant.
Line and Staff PositionsLine 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 line position is directly involved in achieving the basic objectives of an organization.
– Example: A production supervisor in a manufacturing plant.
1-13
Learning Objective
6
Learning Objective
6
1-14
ControllerController
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
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
1-15
TreasurerTreasurer
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
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
1-16
Internal AuditorInternal 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 theeffectiveness of theorganizations accountingsystem.
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 theeffectiveness of theorganizations accountingsystem.
1-17
Learning Objective
7
Learning Objective
7
1-18
Major Themes in Managerial Major Themes in Managerial AccountingAccounting
ManagerialManagerialAccountingAccounting
Informationand IncentivesInformation
and Incentives
Costs andBenefits
Costs andBenefits
Evolution andAdaptation
Evolution andAdaptation
BehavioralIssues
BehavioralIssues
1-19
Evolution and Adaptation in Evolution and Adaptation in Managerial AccountingManagerial Accounting
E-Business
Service vs. Manufacturing Firms
Emergence of NewIndustries
Global Competition
Focus on the Customer
Cross-Functional Teams
Product Life Cycles
Time-Based Competition
Information andCommunication
Technology
Just-in-Time Inventory
Total Quality Management
Continuous Improvement
ChangeChange
1-20
ObjectivesMeasure the cost of
resources consumed.Identify and eliminate
non-value-added costs.
ObjectivesMeasure the cost of
resources consumed.Identify and eliminate
non-value-added costs.
Cost Management SystemsCost Management Systems
CostManagement
System
1-21
ObjectivesDetermine efficiency
and effectiveness of major activities.
Identify and evaluate new activities that can improve performance.
ObjectivesDetermine efficiency
and effectiveness of major activities.
Identify and evaluate new activities that can improve performance.
Cost Management SystemsCost Management Systems
CostManagement
System
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Learning Objective
8
Learning Objective
8
1-23
ProductProductDesignDesign
ProductProductDesignDesign
ResearchResearchandand
DevelopmentDevelopment
ResearchResearchandand
DevelopmentDevelopment
Strategic Cost Management and Strategic Cost Management and the Value Chainthe Value Chain
Securing rawSecuring rawmaterials andmaterials and
other resourcesother resources
Securing rawSecuring rawmaterials andmaterials and
other resourcesother resources
ProductionProductionProductionProduction
MarketingMarketingMarketingMarketing
DistributionDistributionDistributionDistribution
CustomerCustomerServiceService
CustomerCustomerServiceServiceStartStart
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Theory of ConstraintsTheory of Constraints
A sequential process of identifying and identifying and removing constraintsremoving constraints in a system.
Restrictions or barriers that impedeprogress toward an objective
Restrictions or barriers that impedeprogress toward an objective
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Learning Objective
9
Learning Objective
9
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Ethical Climate of BusinessEthical 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.
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.
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Learning Objective
10
Learning Objective
10
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Managerial Accounting as a Managerial Accounting as a CareerCareer
Professional Organizations
Institute of Management Accountants (IMA)Institute of Management Accountants (IMA)
PublishesManagementAccounting
and researchstudies.
PublishesManagementAccounting
and researchstudies.
AdministersCertified
ManagementAccountant
program
AdministersCertified
ManagementAccountant
program
DevelopsStandards of
EthicalConduct forManagementAccountants
DevelopsStandards of
EthicalConduct forManagementAccountants
1-29
Professional EthicsProfessional Ethics
CompetenceCompetenceConfidentialityConfidentialityIntegrityIntegrityCredibilityCredibility
1-30
End of Chapter 1End of Chapter 1
1-31