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Dec 09, 2015
Introduction to Managerial Accounting
Prof. Pamela GonzalezSource: Cornerstones of Managerial Accounting, 5e
Managerial Accounting
Managerial accounting is providing accounting information for a company’s internal users.
1• To provide information for planning the organization’s actions.
2
• To provide information for controlling the organization’s actions.
3• To provide information for making effective decisions.
Objectives:
Planning
The detailed formulation of action to achieve a particular
end.
Setting Objectives
Identifying methods to achieve those objectives
ControllingThe managerial activity of
monitoring a plan’s implementation and taking
corrective action as needed.Actual
Performance
Expected Performanc
e
Decision Making
The process of choosing among competing
alternatives.
Financial and Managerial Accounting
Financial Accounting
Managerial Accounting
Provides information for external users. Must follow rules:
SECFASBIASB
Provides information for Internal users. Identifies, collects, measures, classifies, and reports financial and nonfinancial information to internal users in planning, controlling, and decision making.
Current Focus of Managerial Accounting
The business environment in which companies operate has changed
Effective managerial accounting systems provide information that helps improve companies’ planning, control, and decision-making activities.
Important uses of managerial accounting: 1. New methods of estimating product and service
cost and profitability2. Understanding customer orientation3. Evaluating the business from a cross-functional
perspective4. Providing information useful in improving total
quality management.
New Methods of Costing Products and Services
Today’s companies need focused, accurate information on the cost of products and services produced.
Activity-based costing (ABC) is a more detailed approach to determine the cost of goods and services.
Process-value analysis focuses on the way in which companies create value for customers.
Find ways to perform necessary activities more efficiently and eliminate those that do not create customer value.
Customer Orientation
Customer value is a key focus
Firms can establish a competitive advantage by creating better
customer value for the same or lower cost than competitors
Strategic PositioningCost Leadership: Provide the same or better value to customers at a lower cost than competitors.Superior products through differentiation: Increase customer value by providing something to customers not provided by competitors.
Value Chain
Set of activities required to design, develop, produce, market, and deliver products and services, and provide support services to customers.
In managing the value chain, a managerial accountant must understand and measure many functions of the business.
Total Quality ManagementContinuous improvement is the continual search for ways to increase the overall efficiency and productivity of activities by reducing waste, increasing quality, and managing costs.Has created a demand for a managerial
accounting system that provides information about quality.
This has led to a change in accounting, referred to as lean accounting, which organizes costs according to the value chain and collects both financial and nonfinancial information.
A more recent charge of managerial accountants is to help carry out the company’s enterprise risk management (ERM) approach.ERM is a formal way for managerial accountants to identify and respond to the most important threats and business opportunities facing the organization.
Firms reduce time to market by compressing design,
implementation, and production cycles.
Time as a Competitive Element
Time is a crucial element in all phases of the value chain
EfficiencyFor efficiency measures to be of value, costs must be properly defined, measured, and assigned
Role of Managerial Accountant
Assist those who are responsible for carrying out an organization’s basic objectives.
Positions that have direct responsibility for the basic objectives of an
organization are line positions
Positions that are supportive in nature and have only indirect responsibility for an organization’s basic objectives are staff positions
The controller supervises all accounting functions and reports directly to the general manager and chief operating
officer.
Managerial Accounting and Ethical Conduct
Ethical behavior involves choosing actions that are right, proper, and just.
To promote ethical behavior by managers and employees, organizations commonly establish standards of conduct referred to as Company Codes of Conduct.
Important parts of corporate codes of conduct are integrity, performance of duties, and compliance with the rule of law.
They also uniformly prohibit the acceptance of kickbacks and improper gifts, insider trading, and misappropriation of corporate information and assets.
Certification
•Three major forms of certification for managerial accountants:o Certificate in Management Accountingo Certificate in Public Accountingo Certificate in Internal Auditing•Each certification offers particular advantages to a managerial accountant.•All three certifications offer proof of achievement at a minimum level of professional competence.
The Certified Management Accountant (CMA)
•The Certificate in Management Accounting is designed to meet the specific needs of managerial accountants. •Four areas are emphasized in the qualifying examination for the CMA. They are:
o economics, finance, and management;o financial accounting and reporting;o management reporting, analysis, and behavioral issues; ando decision analysis and information systems
The Certified Public Accountant
(CPA)
•The Certificate in Public Accounting is the oldest and most well-known certification in accounting. •The purpose of the certificate is to provide minimal professional qualification for external auditors.
Only a Certified Public Accountant (CPA) is permitted (by law) to serve as an external auditor.
The Certified Internal Auditor (CIA)
•Internal auditing differs from external auditing and managerial accounting, and many internal auditors felt a need for a specialized certification.
•The Certified Internal Auditor (CIA) has passed a comprehensive examination designed to ensure technical competence and has two years’ experience.
Questions!