Lesson 1

PowerPoint Presentation by Gail B. Wright Professor Emeritus of Accounting Bryant University Copyright 2007 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star Logo, and South-Western are trademarks used herein under license. MANAGERIAL ACCOUNTING8TH EDITIONBYHANSEN & MOWEN1 INTRODUCTIONSTUDENT EDITION

LEARNING OBJECTIVESDiscuss the need for management accounting information.Differentiate between management accounting & financial accounting.Provide a brief historical description of management accounting.Continued

LEARNING OBJECTIVESIdentify the current focus of management accounting.Describe role of management accountants in an organization.Explain importance of ethical behavior for managers, management accountants.List 3 forms of certification available to management accountants.

MANAGEMENT ACCOUNTING: ObjectivesCosting services, products, other objectives of interest to management;Planning, controlling, evaluating, & continuous improvement;Decision making.LO 1Decision making

INFORMATION NEEDS: Costing & Decision MakingEXHIBIT 1-1LO 1

INFORMATION NEEDS: The Management ProcessPlanningDetailed actions to achieve a particular endControllingMonitoring plan implementation & employing corrective action when necessaryDecision makingChoosing among competing alternativesLO 1Controlling

Financial accounting is for external users and follows restrictive rules and regulations.Managerial accounting is for internal users (managers) who plan, control, and make decisions.LO 2

A COMPARISON:Management vs. Financial AccountingEXHIBIT 1-2LO 2

Do you know when accounting for managerial decision making began?LO 3

MANAGERIAL ACCOUNTING HISTORYBeginnings between 1880 and 1925Pre-1915, management accounting focused on product costing, that is, what products provided best profit1925 to 1950, emphasis on inventory costing systemsImprovements to inventory costing in 1950s and 1960s1980s recognized need for improvements in management accountingLO 3

Do you know what the current focus for managerial accounting is?LO 4

CURRENT FOCUSNeed for innovation and relevant produces:Activity based managementABC Improves accuracy of assigning costsCustomer orientationStrategic positioning to maintain competitive advantageValue chain framework to focus on customer valueCross functional perspectiveUnderstand importance of value chain from manufacturing to marketing to distribution to customer serviceContinuedLO 4

CURRENT FOCUSNeed for innovation and relevant produces (cont.) Total quality management emphasized continuous improvementTime becomes a competitive advantage for the firm who an compress the value chainImproving efficiency for profit performanceE-business for cost reductionLO 4

What does a value chain look like? How does it work?LO 4

INDUSTRIAL VALUE CHAINEXHIBIT 1-3LO 4A value chain combines the output of several firms sequentially to meet customer needs.

Industrial value chain is critical for strategic cost management. It links value-creating activities from raw materials to disposal of final product by end-use customers.LO 4

SARBANES-OXLEYEnhanced the role of the management accountant byTightening regulation of corporate governanceEstablishing controls over managementRaising importance of managements assessment of internal controlsLO 5

MANAGEMENT ACCOUNTING:Designed for Profit MaximizationThe objective of profit maximization should be constrained by the requirement that profits be achieved through legal and ethical means.11Hansen & Mowen, 2007, p. 17LO 6

What does certification mean for an accountant? What certifications are available to management accountants?LO 7

CERTIFICATIONSignifies the accountant has met requirements forEducationExperienceSignifies the accountant has passed a qualifying examinationLO 7Experience

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