INTRODUCTION

Overview of Managerial Accounting

Accounting Principles II
AC 2102 - Fall Semester, 1999
1
 KEY CONCEPTS & IDEAS
• The basic purposes of management
accounting
• The differences between management
accounting and financial accounting
• The role of management accounting in an
organization
• The emerging themes of management
accounting
• The importance of ethical considerations
and behavior 2
 PURPOSES OF
MANAGEMENT ACCOUNTING
Provide information to assist management in
four basic tasks:
1. Costing out products, services, and
other items
and activities of interest
2. Planning and controlling operations
3. Evaluating the performances of
individual managers and different
operational units
4. Making decisions 3
 CONTEMPORARY
MANAGEMENT ACCOUNTING
INFORMATION SYSTEMS
• Increased accuracy in assigning and
determining costs
• Much greater emphasis on tracking
nonfinancial data and highlighting its
relationship to financial results
• Explicitly attempts to measure changes in
performance (improvement) over time
• More attuned to providing information for
employee empowerment 4
 Mgt. Acct. Vs. Fin. Acct.
Management Acct. Financial Acct.

• Internally Focused • Externally focused

• Not constrained by • Must follow GAAP &
mandatory rules other external rules
• Provides both finan. & • Objective financial
nonfinan. information information
• Emphasis on future • Historical Orientation
• Detailed information • Information on the
on individual units whole firm
5
 Factors Bringing About Change in
Management Accounting
• Customer orientation
• Cross-functional perspective
• Global competition
• Total Quality Management
• Time as a competitive element
• Advances in information technology
• Advances in the manufacturing environ.
• Growth and dereg. in the service industry
• Activity-based management 6
 Total Quality Management
• Where manufacturers strive to create an
environment that will enable workers to
manufacture perfect (zero-defect)
products
• This approach is replacing the
“acceptable quality” attitudes of the past
• This increased emphasis on quality has
created a need for additional financial
and nonfinancial information about
quality 7
 Time As A Competitive Element
• Time is a crucial element in all phases of
the value chain
• World-class firms reduce time to market by
compressing design, implementation, and
production cycles
• Quick delivery is accomplished by
eliminating (or reducing) non-value added
activities
• Information on the correlation between cost
and time is also now needed by the firm 8
 Management Accountants’ Role
• Management accountants are generally in staff
positions
• Their positions are usually supportive and
participatory in nature
• They are not responsible for making operating
decisions, and thus only have indirect
responsibility for achieving the organization’s
basic and targeted objectives
• They assist marketing, manufacturing, service
and financial managers in their decision
making 9
 The Controller
• Chief accounting officer
• Supervises all accounting units
• Often viewed as a member of top
management team
• Often participates in planning, control
and decision-making activities
• Has responsibilities for both external
and internal accounting requirements
10
 Management Accounting
& Ethical Behavior
• Profit maximization should be achieved
through legal and ethical means
• Ethical behavior involves choosing actions
that are “right,” and “proper,” and “just”
• Underlying principle is the belief that each
member of the group bears some
responsibility for the well-being of other
members
• Willingness to sacrifice one’s self-interest
for the group is the heart of ethical action 11
 Ten Core Values Underlying
Ethical Behavior Principles
• Honesty • Respect for others
• Integrity • Responsible
• Promise keeping citizenship
• Fidelity • Pursuit of
excellence
• Fairness
• Accountability
• Caring for others
12
 Standards of Ethical Conduct
for Management Accountants
• The standards are specified within the
following categories:
I. Competence
II. Confidentiality
III. Integrity
IV. Objectivity
V. Resolution of Ethical Conflict

13
 Certification of Professional
Competence for Mgt. Accountants
• Numerous forms of certification available to
management accountants
• These certifications offer evidence that the
holder has achieved a minimum level of
professional competence
• Three major certification programs:
– The CMA (Certified Management Accountant)
– The CPA (Certified Public Accountant)
– The CIA (Certified Internal Auditor) 14
 Before You Begin Reading &
Studying A Chapter’s Content
• Carefully read the learning objectives at the
start of the chapter
• Quickly “flip through” the pages of the
chapter and note the titles and sub-titles of
each section
• Read the questions at the end of the chapter
• Read the summary of the learning
objectives at the end of the chapter
• Expect to read the chapter more than once 15