Chapter 1
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The Changing Role of Managerial Accounting in a Dynamic Business Environment
ACG 6309
Dr. Chula King
Student Learning Outcomes
• Define managerial accounting and describe its role in the management process.
• Explain four fundamental management processes that help organizations attain their goals.
• List and describe five objectives of managerial accounting activity.
• Explain the major differences between managerial and financial accounting.
• Explain where managerial accountants are located in an organization, in terms of formal organization, deployment in cross‐functional teams, and physical location.
• Describe the roles of an organization's chief financial officer (CFO) or controller, treasurer, and internal auditor.
• Briefly describe some of the major contemporary themes in managerial accounting.
• Understand and explain the concepts of strategic cost management and the value chain.
• Understand the ethical responsibilities of a managerial accountant.
• Discuss the professional organizations, certification process, and ethical standards in the field of managerial accounting.
Managerial Accounting
• Managerial Accounting is the process of
– Identifying
– Measuring
– Analyzing
– Interpreting
– Communicating information
Managing Resources, Activities, and People
An organization . . .
Acquires Resources
Decision
Making
Directing
Organized set
of activities
Controlling
Planning
Hires People
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 activities, managers, and other employees.
• Assessing the organization’s competitive position.
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.
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
financial information.
products manufactured, physical quantities of
material and labor used in production, occupancy
rates in hotels and hospitals, and average take-off
delays
Nature of Reports and Reports often focus on subunits within the
Reports focus on the enterprise in its entirety.
Based almost exclusively on historical transaction
Procedures organization, such as departments, divisions,
geographical regions, or product lines. Based on data.
a combination of historical data, estimates, and
projections of future events.
Line and Staff Positions
A line position is directly
involved in achieving the
basic objectives of an
organization.
A staff position supports and
assists line positions.
Example: A cost accountant in
the manufacturing plant.
Example: A production
supervisor in a manufacturing
plant.
© Dr. Chula King
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Controller
• The chief managerial and financial accountant who has responsibility for
– Supervising accounting personnel
– Preparing information and reports, both Preparing information and reports both
managerial and financial
– Analyzing accounting information
– Planning and decision making
Treasurer
• Responsible for raising capital and safeguarding the organization’s assets
– Supervises relationships with financial institutions
– Works with current and potential investors
Works with current and potential investors
– Manages investments
– Establishes credit policies
– Manages insurance coverage
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 the top management regarding the effectiveness of the organization’s accounting system.
Major Themes in Managerial Accounting
Behavioral
Issues
Costs and
Benefits
Decision
Making
Evolution and
Adaptation
Managerial
Accounting
Cost Management Systems
• Objectives
– Measure the cost of resources consumed.
– Identify and eliminate non‐value‐added costs.
– Determine efficiency and effectiveness of major Determine efficiency and effectiveness of major
activities.
Cost
Management
– Identify and evaluate new activities that can System
improve performance.
Strategic Cost Management and the Value Chain
Product
Design
Production
Research
and
Development
Marketing
Securing raw
materials and
other resources
Distribution
Customer
Service
Value
Chain
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 and can be disastrous in the economy In
addition to Sarbanes‐Oxley, there will likely be more reforms in corporate governance and accounting.
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
Professional Ethics
• Competence
• Confidentiality
• Integrity
• Credibility
Concluding Comments
• Define managerial accounting and describe its role in the management process.
• Explain four fundamental management processes that help organizations attain their goals.
• List and describe five objectives of managerial accounting activity.
• Explain the major differences between managerial and financial accounting.
• Explain where managerial accountants are located in an organization, in terms of formal organization, deployment in cross‐functional teams, and physical location.
• Describe the roles of an organization's chief financial officer (CFO) or controller, treasurer, and internal auditor.
• Briefly describe some of the major contemporary themes in managerial accounting.
• Understand and explain the concepts of strategic cost management and the value chain.
• Understand the ethical responsibilities of a managerial accountant.
• Discuss the professional organizations, certification process, and ethical standards in the field of managerial accounting.