Managerial Accounting - Fisher College of Business

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Chapter 1
Major Differences Between
Financial & Managerial Accounting
Managerial Accounting
Financial Accounting
Decision making
Communicate financial
position to outsiders
Internal managers
External users
Future-oriented
Past-oriented
Do not have to follow GAAP;
cost vs. benefit
GAAP compliant;
CPA audited
Time Span
Ultra current to very long
time horizons
Historical monthly,
quarterly reports
Behavioral
Issues
Designed to influence
employee behavior
Indirect effects on
employee behavior
Purpose
Primary Users
Focus/Emphasis
Rules
Strategy and Management Accounting
• Strategy – specifies how an organization
matches its own capabilities with the
opportunities in the marketplace to accomplish
its objectives
• Management Accounting provides information
towards formulating, communicating and
implementing strategy
Strategy & Management Accounting
• Management accounting helps answer important
questions such as:
– Who are our most important customers, and how do
we deliver value to them?
– What substitute products exist in the marketplace,
and how do they differ from our own?
– What is our critical capability?
– Will we have enough cash to support our strategy or
will we need to seek additional sources?
Management Accounting and Value
• Creating value is an important part of
formulating and implementing strategy
• Value is the usefulness a customer gains from
a company’s product or service
• Value Chain is the sequence of business
functions in which customer usefulness is
added to products or services
Management Accounting and Value
• The Value Chain:
–
–
–
–
–
–
Research and Development
Design
Production
Marketing
Distribution
Customer Service
• Management accounting can provide information in
each of these areas
• Analysis can also include the supply chain
Key Success Factors
• The dimensions of performance that customers
expect, and that are key to the success of a
company include:
–
–
–
–
Cost and efficiency
Quality
Time
Innovation
Formulating and Implementing Strategy
Planning
Controlling
Planning & Control Systems
• Planning selects goals, predicts results, decides
how to attain goals, and communicates this to
the organization
– Budget – the most important planning tool
• Control takes actions that implement the
planning decision, decides how to evaluate
performance, and provides feedback to the
organization
Management Accounting Guidelines
• Cost – benefit approach is commonly
used: benefits generally must exceed
costs as a basic decision rule
• Behavioral Considerations – people
should be involved in decisions
• Different definitions of cost may be used
for different applications
Line and Staff Relationships
Line management is directly responsible for
attaining the objectives of the organization.
Staff management exists to provide advice
and assistance to line management.
Line and Staff Relationships
Board of Directors
Chairman
Chief Executive Officer (CEO)
President
Chief Operating Officer (COO)
Chief Financial Officer (CFO)
Controller
Audit
Tax
Treasury
Risk
Management
Investor
Relations
Ethical Guidelines
The Institute of Management Accountants (IMA)
is the largest association of management
accountants in the United States.
The IMA has issued a Standards of Ethical
Conduct for Management Accountant.
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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