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Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin
Chapter 1
The Changing Role
of Managerial
Accounting in a
Dynamic Business
Environment
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
1
1-3
Managerial accounting is the process of
Identifying
Measuring
Analyzing
Interpreting
Communicating information
Define Managerial Accounting
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
2
1-5
Managing Resources, Activities,
and People
An organization . . .
Acquires Resources
Hires People
Organized set
of activities
Decision
Making
Planning
Directing
Controlling
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
3
1-7
How Managerial Accounting
Adds Value to the Organization
Providing information for decision making and
planning.
Assisting managers in directing and controlling
activities.
Motivating managers and other employees
towards organizations goals.
Measuring performance of subunits, activities,
managers, and other employees.
Assessing the organizations competitive position.
1-8
The Balanced Scorecard
Financial Perspective
Goals Measures
Customer Perspective
Goals Measures
Operations Perspective
Goals Measures
Innovation Perspective
Goals Measures
How do we look
to owners?
How do customers
see us?
How can we
continue to
improve?
In which activities
must we excel?
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
4
1-10
Managerial versus Financial
Accounting
Accounting System
(accumulates financial and
managerial accounting data in the
cost accounting system)
Managerial Accounting
Information for decision
making, planning, and
controlling an
organizations
operations.
Financial Accounting
Published financial
statements and other
financial reports.

Internal
Users
External
Users
1-11
Managerial versus Financial
Accounting
Managerial Accounting Financial Accounting
Users of Information Managers, within the organization. Interested parties, outside the organization.
Regulation Not required and unregulated, since it is intended
only for management.
Required and must conform to generally accepted
accounting principles. Regulated by the Financial
Accounting Standards Board, and, to a lesser
degree, the Securities and Exchange
Commission.
Source of Data The organization's basic accounting system, plus
various other sources, such as rates of effective
products manufactured, physical quantities of
material and labor used in production, occupancy
rates in hotels and hospitals, and average take-off
delays in airlines.
Almost exclusively drawn from the organization's
basic accounting system, which accumulates
financial information.
Nature of Reports and
Procedures
Reports often focus on subunits within the
organization, such as departments, divisions,
geographical regions, or product lines. Based on a
combination of historical data, estimates, and
projections of future events.
Reports focus on the enterprise in its entirety.
Based almost exclusively on historical transaction
data.
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
5
1-13
A staff position supports
and assists line positions.
Example: A cost
accountant in the
manufacturing plant.
Line and Staff Positions
A line position is directly
involved in achieving the
basic objectives of an
organization.
Example: A production
supervisor in a
manufacturing plant.
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
6
1-15
Controller
The chief managerial and financial accountant
responsibility for:
Supervising accounting personnel
Preparation of information and reports, managerial
and financial
Analysis of accounting information
Planning and decision making
1-16
Treasurer
Responsible for raising capital and safeguarding the
organizations assets.
Supervises relationships with financial institutions.
Work with investors and potential
investors.
Manages investments.
Establishes credit policies.
Manages insurance coverage
1-17
Internal Auditor
Responsible for reviewing accounting procedures,
records, and reports in both the controllers and the
treasurers area of responsibility.
Expresses an opinion to top
management regarding the
effectiveness of the
organizations accounting
system.
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
7
1-19
Major Themes in Managerial
Accounting
Managerial
Accounting
Information
and Incentives
Costs and
Benefits
Evolution and
Adaptation
Behavioral
Issues
1-20
Evolution and Adaptation in
Managerial Accounting
E-Business
Service vs.
Manufacturing Firms
Emergence of New
Industries
Global Competition
Focus on the Customer
Cross-Functional Teams
Product Life Cycles
Time-Based
Competition
Information and
Communication
Technology
Just-in-Time Inventory
Total Quality Management
Continuous Improvement
Change
1-21
Objectives
Measure the cost of
resources consumed.
Identify and eliminate
non-value-added
costs.
Cost Management Systems
Cost
Management
System
1-22
Objectives
Determine efficiency
and effectiveness of
major activities.
Identify and evaluate
new activities that
can improve
performance.
Cost Management Systems
Cost
Management
System
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
8
1-24
Product
Design
Research
and
Development
Strategic Cost Management and
the Value Chain
Securing raw
materials and
other resources
Production
Marketing
Distribution
Customer
Service
Start
1-25
Theory of Constraints
A sequential process of identifying and
removing constraints in a system.
Restrictions or barriers that impede
progress toward an objective
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
9
1-27
Ethical Climate of Business
The corporate scandals experienced over the last
few years have shown us that unethical behavior
in business is wrong in a moral sense and can be
disastrous in the economy. In addition to
Sarbanes-Oxley, there will likely be more reforms
in corporate governance and accounting.
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Learning
Objective
10
1-29
Managerial Accounting as a
Career
Professional Organizations
Institute of Management Accountants (IMA)
Publishes
Management
Accounting
and research
studies.
Administers
Certified
Management
Accountant
program
Develops
Standards of
Ethical
Conduct for
Management
Accountants
1-30
Professional Ethics
Competence
Confidentiality
Integrity
Credibility
1-31
End of Chapter 1