Managerial Accounting and
the Business Environment
Class One
Comparison of 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. GAAP
Must follow GAAP
and prescribed formats
Need not follow GAAP
or any prescribed format
Mandatory for
external reports
Not
Mandatory
1. Users
2. Time focus
7. Requirement
Strategy
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.
Customer Value Propositions
Customer
Intimacy
Proposition
Understand and respond to
individual customer needs.
Operational
Excellence
Proposition
Deliver products and services
faster, more conveniently,
and at lower prices.
Product
Leadership
Proposition
Offer higher quality products.
Work of Management
Planning
Directing and
Motivating
Controlling
Planning
Identify
alternatives.
Select alternative that does
the best job of furthering
organization’s objectives.
Develop budgets to guide
progress toward the
selected alternative.
Directing and Motivating
Directing and motivating involves managing
day-to-day activities to keep the organization
running smoothly.
 Employee work assignments.
 Routine problem solving.
 Conflict resolution.
 Effective communications.
Controlling
The control function ensures
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.
Planning and Control Cycle
Formulating longand short-term plans
(Planning)
Comparing actual
to planned
performance
(Controlling)
Decision
Making
Measuring
performance
(Controlling)
Begin
Implementing
plans (Directing
and Motivating)
Organizational Structure
Corporate Organization Chart
Board of Directors
President
Sales
Personnel
Vice President
Operations
Chief Financial
Officer
Treasurer
Controller
Code of Conduct for
Management Accountants
The Institute of Management Accountant’s (IMA)
Standards of Ethical Conduct for Practitioners
of Management Accounting and Financial
Management have two major parts offering
guidelines for:
 Ethical behavior.
 Resolution for an ethical conflict.
Ethical Behavior
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
Resolution of an Ethical Conflict
• Follow established policies.
• For unresolved ethical conflicts:
 Discuss the conflict with immediate superior.
 Make reference to the Sarbanes-Oxley Act
passed by Congress in 2002 in part to give
legal protection to those reporting corporate
misconduct.
 Consider the board of directors or
the audit committee.
 The last resort is to resign.