Introduction to

Managerial
Accounting
Chapter 1

Managers Responsibilities
Planning

Decision
Making

Setting goals and

objectives

Directing

Overseeing day-to-day
operations

Controlling

Evaluating results
of operations
2

Planning
Setting goals and objectives and how to
achieve them
Examples of planning:
Generate more sales via opening new
stores
Reduce labor costs by reducing store
hours
Budgets

Directing
Overseeing companys day-to-day operations
Examples:
Using daily/weekly sales reports to adjust
marketing strategies
Using product cost reports to adjust raw
material usage

Controlling
Evaluating results of operations against plans
and making adjustments as needed
Examples:
Comparing budgeted sales with actual sales
to take corrective actions
Comparing budgeted product costs against
actual product costs to take corrective
actions

Decision Making
Management is continually making decisions
while it plans, directs, and controls operations
Examples:
Price setting or product offerings
Renovation of facilities
Operation openings or closings

Managerial vs. Financial

Accounting
Issue

Managerial

Financial

Primary users

Internal

External

Purpose of
information

Plan, direct,
control, decide

Users make
investing and
lending decisions

Primary
accounting
product

Internal reports
useful to
management

General purpose
financial
statements

What is
included?

Defined by
management

Determined by
GAAP

Internal &
Underlying basis external
of information
transactions,
focus on future

Based on historical
transactions with
external parties
7

Managerial vs. Financial

Accounting
Issue
Managerial
Emphasis
Business Unit
Preparation
Verification

Data must be
relevant
Segments of the
business
Depends on
management
needs
Internal audit

Information
requirements

No requirements

Impact on
employee

Careful

Financial

Data must be
reliable and
objective
Company as a
whole
Annually &
quarterly
External audit
SEC requires
publicly traded
cos. to issue
audited fin. sts.
Adequacy of

Organizational Structure
Board of
Directors
Audit
Committee
Chief Executive
Officer

Chief Operating
Officer
Vice Presidents
of various
operations

Chief Financial
Officer

Treasurer

Controller

Internal Audit

Changing Roles of
Management
Accountants

Impact of technology
Ensuring accurate financial
records
Planning, analyzing, and
interpreting accounting data
Providing decision support

10

Required Skills of
Managerial Accountants
Knowledge of financial and
managerial accounting
Analytical skills (critical thinking)
Knowledge of how a business
functions
Ability to work on a team
Oral and written communications
skills
11

Institute of Management
Accountants (IMA) www.imanet.org

Professional association for

management accountants
IMAs functions

Certification (CMA)
Practice Development
Education
Networking
Ethical Standards
Public Education

12

Summary of IMA Ethical

Standards
Competence

Confidentiality

Integrity

Credibility

13

Ethical Behavior

Means doing the right thing, regardless

of consequences
Examples of unethical behavior
Allowing reimbursement of false expense reports
Manipulating income
Performing tasks not qualified to perform

Steps to resolve ethical dilemmas

Follow companys policies for reporting
unethical behavior
If not resolved

Discuss with immediate supervisor

Discuss with objective advisor
Consult an attorney
14

Regulatory and Business

Issues
Sarbanes-Oxley Act of 2002 (SOX)
International Financial Reporting
Standards (IFRS)
Extensible Business Reporting
Language (XBRL)
Shifting economy

15

Sarbanes-Oxley Act of 2002 (SOX)

Restore trust in publicly traded
corporations, management, financial
statements, and auditors
CEO /CFO requirements:
Financial statements
Internal control structure
Annual assessment
Independent audit committee
Increases white-collar crime
penalties
16

International Financial
Reporting Standards
(IFRS)

Results of globalization
Consistent reporting standards
needed worldwide
SEC is studying IFRS

Current IFRS information:

www.IFRS.com or www.IASB.org
17

Extensible Business
Reporting Language
(XBRL)
Standardized tagging system for
financial reports
Advantages:

Decreases retrieval time

Decreases conversion time
Facilitates comparisons
Customizes information

18

Shifting Economy
Shift away from manufacturing toward
service
Managerial accounting has expanded
Competing in Global Marketplace
Barriers to international trade have
fallen
More accurate and timely information
needed
19

Tools for Time-Based

Competition

Enterprise resource planning (ERP)

Supply-chain management
Lean production & Just-in-time
(JIT)Inventory system
Total quality management (TQM)

20

Enterprise Resource
Planning (ERP)
System that integrates a companys
functions, departments, and data
Advantages
Streamline operations
Respond quickly to changes
Replace separate software
systems
Disadvantage -- expensive
21

Supply-Chain Management
Exchange of information with
suppliers
Reduce costs
Improve quality
Speed the delivery

22

Lean Production
A philosophy and business strategy of
manufacturing without waste
Lowers costs
Increases competitive position

Just in Time Inventory (JIT)

Manufacture just in time to fill orders
Reduces:

Raw materials inventory

Finished goods inventory
Storage costs
Handling costs
23

TQM : Total Quality

Management
Goal to provide customers with
superior products and services
Continually set higher goals for
quality
International Organization for
Standardization (ISO)
24