Chapter 1-1 Explain the need for management accounting information. Explain the differences between management accounting and financial accounting. Provide a brief historical description of management accounting. Identify and explain the emerging themes of management accounting. Describe the role of management accountants in an organization. Learning Objectives
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Chapter 1-1 l Explain the need for management accounting information. l Explain the differences between management accounting and financial accounting.
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Chapter 1-1
Explain the need for management accounting information.
Explain the differences between management accounting and financial accounting.
Provide a brief historical description of management accounting.
Identify and explain the emerging themes of management accounting.
Describe the role of management accountants in an organization.
Learning Objectives
Chapter 1-2
Learning Objectives (continued)
Explain the importance of ethical behaviour for managers and management accountants.
Identify the three forms of certification available to management accountants.
Special ReportsProduct Costs Customer CostsPerformance ReportsPersonal Communication
Chapter 1-4
The Management Process
The Management Process is defined by the following activities:
– Planning
– Controlling
– Decision making
Chapter 1-5
The Management Process(continued)
Planning requires setting objectives and identifying methods to achieve those objectives.
Chapter 1-6
The Management Process(continued)
Controlling is the managerial activity of monitoring a plan’s implementation and taking corrective action as needed.
Control is usually achieved with the use of feedback, which is information that can be used to evaluate or correct the steps being taken to implement a plan.
Chapter 1-7
The Management Process(continued)
Decision making is the process of choosing among competing alternatives.
Chapter 1-8
Conceptual Framework of Management Accounting
Cost Accounting Systems (Part I of Text)– ‘Know your costs’
– The how to of ‘cost accumulation & allocation’
Managerial Decision Making (Part II of Text)– ‘What difference will it make’ when a choice is to be made
between alternative courses of action?
– We assume economically-rational organizations and de-emphasize the role of individual decision-makers
Planning & Control Systems (Part III of Text)– Focus on how organizations run by delegation & accountability
– Information asymmetry (subordinate knows what superior does not know) results in problems of harmony of objectives. We assume economically rational decision makers who have their own goals within the organization
Chapter 1-9
Management Accounting Financial Accounting
1. Internal focus2. No mandatory rules3. Financial and nonfinancial
information; subjective information possible
4. Emphasis on the future5. Internal evaluation and
decisions based on detailed information6. Broad, multidisciplinary
information4. Historical orientation5. Information about the
firm as a whole6. More self-contained
Comparison of Management and Financial Accounting
Chapter 1-10
Historical Description ofManagement Accounting
1880 - 1925 Most of the product-costing and internal accounting procedures used in this century were developed
1925 Emphasis of inventory costing for external reporting
1950s/60s Effort to improve the managerial usefulness of traditional cost systems
1980s/90s Significant efforts have been made to radically change the nature and practice of management accounting
Chapter 1-11
Emerging Themes ofManagement Accounting
Activity-Based Management Customer Orientation Cross-Functional Perspective Total Quality Management Time as a Competitive
Element Efficiency
Chapter 1-12
Most Innovative in Management? Comment from Peter Drucker
–"The most exciting and innovative work in management today is found in accounting theory, with new concepts, new methodology--even what might be called new economic philosophy--rapidly taking shape. And while there is enormous controversy over specifics, the lineaments of the new manufacturing accounting are becoming clearer every day.”
Peter E. Drucker, “The Emerging Theory of Manufacturing,” Harvard Business Review, May-June 1990, pp. 94-102.
Chapter 1-13
Partial Organization Chart - Manufacturing Company
President
ProductionVice-president
FinancialVice-president
Controller Treasurer MachiningSupervisor
AssemblySupervisor
Treasurer'sFunctions
Controller’sFunctions
Chapter 1-14
Role of Controller and Treasurer
Controller Treasurer
1. Collection of cash2. Monitoring of cash payments 3. Monitors cash availability4. Short-term investments5. Short and long-term borrowing6. Issuing of capital stock
1. Financial reports2. Securities commission reporting3. Tax planning and reporting4. Performance reporting5. Internal auditing6. Budgeting 7. Accounting systems and internal controls
Chapter 1-15
Management Accounting andEthical Conduct
Abuse of accounting information Acceptance of bribes or gifts Conflict of interest Disclosure of confidential information
Some Types of Unethical Conduct
Chapter 1-16
Standards of Ethical Conduct for Management Accountants
Competence Confidentiality Integrity Objectivity
Chapter 1-17
Competence
Maintain professional competence. Perform professional duties in accordance with relevant
laws, regulations, and technical standards. Prepare complete and clear reports and recommendations.
Management Accountants have a responsibility to
Chapter 1-18
Confidentiality
Refrain from disclosing confidential information. Inform subordinates as to how to handle confidential
information. Refrain from using confidential information for unethical or
illegal advantage.
Management Accountants have a responsibility to
Chapter 1-19
Integrity
Avoid conflicts of interest. Refrain from activity that would prejudice their ability to carry
out their duties ethically. Refuse gifts, favors, or hospitality that would influence their
actions. Refrain from subverting attainment of the organization’s
legitimate and ethical objectives.
Management Accountants have a responsibility to
Chapter 1-20
Integrity (continued)
Recognize and communicate professional limitations that would preclude responsible judgment.
Communicate unfavourable as well as favourable information.
Refrain from engaging in or supporting any activity that would discredit the profession.
Management Accountants have a responsibility to
Chapter 1-21
Objectivity
Communicate information fairly and objectively. Disclose fully all relevant information that could reasonably
be expected to influence user's understanding of the reports, comments, and recommendations presented.
Management Accountants have a responsibility to
Chapter 1-22
Resolution of Ethical ConflictCourses of actions
Discuss problems with immediate supervisor except when it appears the superior is involved.
If the immediate superior is the chief executive officer, or equivalent, the acceptable reviewing authority may be the audit committee, board of trustees, or owners.
Clarify relevant concepts by confidential discussion with an objective advisor to obtain an understanding of possible courses of action.
Chapter 1-23
Resolution of Ethical Conflict (continued)
Courses of actions
If the ethical conflict still exists after exhausting all levels of internal review, the management accountant may have no other recourse than to resign.
Except where legally prescribed, communication of such problems with external parties is not appropriate.
Chapter 1-24
CA- The distinguishing characteristic of the profession is its unchallenged right to provide assurance concerning the reliability of financial statements to external parties.
CMA-The distinguishing characteristic of the profession is its upholding of management accounting as a recognized, professional discipline, separate from public accounting.
CGA- CGA’s may specialize in financial, managerial, or tax accounting but the right to audit financial statements is somewhat restricted.