WHAT IS MANAGERIAL ACCOUNTING?
The process of identification, measurement,
accumulation, analysis, preparation, interpretation,
and communication of financial information used
by management to plan, evaluate, and control
within an organization and to assure appropriate
use of and accountability for its resources.
Institute of Management Accountants, Statement on Management Accounting #1A, 1981
AGAIN I ASK, WHAT IS MANAGERIAL ACCOUNTING?
A profession that involves partnering in
management decision making, devising planning
and performance management systems, and
providing expertise in financial reporting and
control to assist management in the formulation
and implementation of an organization’s strategy.
Institute of Management Accountants, Statement on Management Accounting, Definition of
Management Accounting, 2008
IN SIMPLER TERMS…
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
Lack of mandated rules
GAAP
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
Lack of mandated rules
Focus on operating segments
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
Lack of mandated rules
Focus on operating segments
Focus on the future
© Michelle Hillmer/iStockphoto
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
Lack of mandated rules
Focus on operating segments
Focus on the future
Emphasis on timeliness
© Mirjana Jovic/iStockphoto
WHAT DO MANAGERS DO?
Planning
Controlling
Evaluating
Decision Making
PLANNING IS…
What: Setting strategic and operational goals and objectives
Translating these into specific activities
Allocating resources for their achievement
Who:
Upper and middle managers
When: Strategic: annually, with a 5 to 10 year horizon
Operational: monthly, quarterly, or annually
CONTROLLING IS…
What: Monitoring day-to-day operations
Exerting managerial influence on operations to
conform to plans
Taking corrective action as needed
Who:
Managers and line workers
When: In real time – hourly, daily, weekly
EVALUATING IS…
What: Comparing actual results to planned results
Assessing individual performance
Taking corrective action as needed
Who:
Managers
When: Weekly, monthly, quarterly, or annually
DECISION MAKING IS…
What: Using information to choose the best alternative
from available options made in pursuit of a particular
goal or objective
Who:
Managers and line workers
When: As needed
MANAGER PRACTICE SESSION 1
Think of yourself as the manager in your
approach to this managerial accounting course.
What is your plan (goal) for the course?
How will you control your day-to-day operations?
How will you evaluate your performance?
What decisions will you make?
STRATEGY DETERMINES INFORMATION NEEDS
An organization needs to set strategies first and
then determine the information required to monitor
achievement of those strategies
Different strategies require different information
sets
• Product differentiation vs. low-cost production
• Market share: build, hold, harvest, or divest
Many tools are available to provide this
information and assist in decision making activities
THE BALANCED SCORECARD
Developed in the early 1990s to provide a
multidimensional assessment of strategic
achievement
Measures go beyond traditional financial indicators
of success
SUPPLY CHAIN MANAGEMENT
A network of trading partners (customers and
suppliers)
From raw material creation to end user
Get the right products to the right location, in the
right quantities, at the right time, at the right cost
Identify the supply chain trading partners involved in
getting your textbook for this course into your hands.
JUST-IN-TIME (JIT) INVENTORY
An inventory management philosophy that
attempts to minimize the amount of inventory on
hand
Requires frequent deliveries of small lots of
materials
Requires a complementary quality program since
there is no extra inventory to replace defective
components
ENTERPRISE RESOURCE PLANNING (ERP) SYSTEMS
An information system that integrates the
organization’s data into a single system
Facilitates the sharing of information across the
organization to support decision making activities
WHAT IS ETHICAL BEHAVIOR?
Knowing right from wrong, and then doing the right
thing
Ethical behavior is not necessarily the same thing
as legal behavior
Unethical behavior can result in catastrophic
results
Top managers in the organization must model
ethical behavior for the rest of the organization
IMA STATEMENT OF ETHICAL PROFESSIONAL PRACTICE
Overarching principles: Honesty, Fairness,
Objectivity, Responsibility
Four standards
•
•
•
•
Competence
Confidentiality
Integrity
Credibility
Steps to resolve ethical conflict
UNETHICAL BEHAVIOR IS AROUND
Sources: Ethics Resource Center, National Business Ethics Survey: How Employees View Ethics in Their
Organizations 1994-2005 and National Business Ethics Survey: An Inside View of Private Sector Ethics, 2007