Chapter 1
Managerial Accounting &
the Business Environment
Managerial Accounting and
Financial Accounting
Managerial accounting
provides information
for managers inside an
organization who
direct and control
its operations.
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Financial accounting
provides information
to stockholders,
creditors and others
who are outside
the organization.
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Differences Between Financial
and Managerial Accounting
Financial Accounting
Managerial Accounting
External persons who
make financial decisions
Managers who plan for
and control an organization
Historical perspective
Future emphasis
3. Verifiability
versus relevance
Emphasis on
verifiability
Emphasis on relevance
for planning and control
4. Precision versus
timeliness
Emphasis on
precision
Emphasis on
timeliness
5. Subject
Primary focus is on
the whole organization
Focuses on segments
of an organization
6. Requirements
Must follow GAAP
and prescribed formats
Need not follow GAAP
or any prescribed format
1. Users
2. Time focus
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The Changing Business
Environment
Growth of the internet
Just-in-Time production
Total Quality
Management
International competition
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Business environment
changes in the past
twenty years
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The Changing Business
Environment
New tools for
managers!
Just-In-Time
Total Quality
Management
Process Reengineering
Theory of Constraints
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Expanding Role of Managerial
Accounting
Increasing complexity and
size of organizations
Regulatory
environment
World-wide
competition
Factors that
increase the need for
managerial accounting
information
Increased
emphasis
on quality
Rapid development and
implementation of technology
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Importance of Ethics
in Accounting
Ethical accounting practices build trust and
promote loyal, productive relationships with
users of accounting information.
Many companies and professional
organizations, such as the Institute
of Management Accountants (IMA),
have written codes of ethics which
serve as guides for employees.
 Code of Conduct for Management
Accountants
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IMA Code of Ethics for
Management Accountants
Four broad areas of
responsibility:
Maintain a high level of
professional competence
treat sensitive matters with
confidentiality
Maintain personal integrity
Be objective in all
disclosures
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CAREER OPPORTUNITIES IN
MANAGEMENT ACCOUNTING
Over 2/3’s of all professional accountants
work as Management Accountants.
Management Accounting has become a route
to the top!
Leadership + Accounting Credential =
Potential for Success!!!
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The SRC Story
Formerly International Harvestor
Jack Stack.
98.9% financed at
22%.
The “Game of
Business”
Philosophy.
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