Chapter 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objective 1 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Define Managerial Accounting Managerial accounting is the process of Identifying Measuring Analyzing Interpreting Communicating information 1-3 Learning Objective 2 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Managing Resources, Activities, and People An organization . . . Directing Acquires Resources Decision Making Organized set of activities Controlling Planning Hires People 1-5 Learning Objective 3 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. How Managerial Accounting Adds 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. 1-7 The Balanced Scorecard How do we look to owner’s? Financial Perspective Goals Measures In which activities must we excel? Customer Perspective Goals Measures Operations Perspective Goals Measures How do customers see us? Innovation Perspective Goals Measures How can we continue to improve? 1-8 Learning Objective 4 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Managerial versus Financial Accounting Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Managerial Accounting Information for decision making, planning, and controlling an organization’s operations. Internal Users Financial Accounting Published financial statements and other financial reports. External Users 1-10 Managerial versus Financial Accounting Managerial Accounting Users of Information Managers, within the organization. Regulation Not required and unregulated, since it is intended only for management. Financial Accounting Interested parties, outside the organization. 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 Almost exclusively drawn from the organization's various other sources, such as rates of effective basic accounting system, which accumulates products manufactured, physical quantities of financial information. material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays in airlines. Nature of Reports and Reports often focus on subunits within the Reports focus on the enterprise in its entirety. Procedures organization, such as departments, divisions, Based almost exclusively on historical transaction geographical regions, or product lines. Based on a data. combination of historical data, estimates, and projections of future events. 1-11 Learning Objective 5 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Line 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 staff position supports and assists line positions. – Example: A cost accountant in the manufacturing plant. 1-13 Learning Objective 6 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Controller 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 Treasurer 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 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 the effectiveness of the organizations accounting system. 1-17 Learning Objective 7 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Major Themes in Managerial Accounting Behavioral Issues Costs and Benefits Information and Incentives Evolution and Adaptation Managerial Accounting 1-19 Evolution and Adaptation in Managerial Accounting E-Business Product Life Cycles Time-Based Competition Service vs. Manufacturing Firms Emergence of New Industries Global Competition Focus on the Customer Cross-Functional Teams Change Information and Communication Technology Just-in-Time Inventory Total Quality Management Continuous Improvement 1-20 Cost Management Systems Objectives Measure the cost of resources consumed. Identify and eliminate non-value-added costs. Cost Management System 1-21 Cost Management Systems Objectives Determine efficiency and effectiveness of major activities. Identify and evaluate new activities that can improve performance. Cost Management System 1-22 Learning Objective 8 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Strategic Cost Management and the Value Chain Product Design Production Research and Development Securing raw materials and other resources Start Marketing Distribution Customer Service 1-24 Theory of Constraints A sequential process of identifying and removing constraints in a system. Restrictions or barriers that impede progress toward an objective 1-25 Learning Objective 9 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Ethical 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. 1-27 Learning Objective 10 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Managerial Accounting as a Career Professional Organizations Institute of Management Accountants (IMA) Publishes Management Accounting and research studies. Administers Certified Management Accountant program Develops Standards of Ethical Conduct for Management Accountants 1-29 Professional Ethics Competence Confidentiality Integrity Credibility 1-30 End of Chapter 1 1-31