Managerial Accounting:

An Overview
Chapter 1

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
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Financial and Managerial

Accounting: Seven Key Differences
Financial Accounting Managerial Accounting
1. Users External persons who Managers who plan for
make financial decisions and control an organization

2. Time focus Historical perspective Future emphasis

3. Verifiability Emphasis on Emphasis on

versus relevance objectivity and verifiability relevance

4. Precision versus Emphasis on Emphasis on

timeliness precision timeliness

5. Subject Primary focus is on Focus on

companywide reports segment reports

6. Rules Must follow GAAP / IFRS Not bound by GAAP / IFRS

and prescribed formats or any prescribed format
7. Requirement Mandatory for Not
external reports Mandatory
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Work of Management

Planning Controlling

Decision
Making
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Planning

Establish Goals.

Specify How Goals

Will Be Achieved.

Develop Budgets.
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Controlling
The control function gathers feedback to
ensure that plans are being followed.

Feedback in the form of performance reports

that compare actual results with the budget
are an essential part of the control function.
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Decision Making
Decision making involves
making a selection among
competing alternatives.

What should
we be selling?
Who should
we be serving?
How should
we execute?
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Managerial Accounting Activities:

Marketing Majors

Planning

How much should we budget for TV,

print, and internet advertising?

How many salespeople should we

plan to hire to serve a new territory?
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Managerial Accounting Activities:

Marketing Majors

Controlling

Is the budgeted price cut

increasing unit sales as expected?

Are we accumulating too much

inventory during the holiday
shopping season?
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Managerial Accounting Activities:

Marketing Majors
Decision
Making

Should we sell our services as

one bundle or sell them
separately?

Should we sell directly to

customers or use a distributor?
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Managerial Accounting Activities:

Operations Management Majors

Planning

How many units should we plan to

produce next period?

How much should we budget for next

period’s utility expense?
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Managerial Accounting Activities:

Operations Management Majors

Controlling

Did we spend more or less than

expected for the units we actually
produced?

Are we achieving our goal of

reducing the number of defective
units produced?
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Managerial Accounting Activities:

Operations Management Majors
Decision
Making

Should we buy a new piece of

equipment or upgrade our existing
machine?

Should we redesign our

manufacturing process to lower
inventory levels?
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Managerial Accounting Activities:

Human Resource Management Majors

Planning

How much should we plan to

spend for occupational safety
training?

How much should we plan to

spend on employee recruitment
advertising?
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Managerial Accounting Activities:

Human Resource Management Majors

Controlling

Is our employee retention rate

exceeding our goals?

Are we meeting our goal of

completing timely performance
appraisals?
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Managerial Accounting Activities:

Human Resource Management Majors

Decision
Making

Should we hire an on-site medical

staff to lower our healthcare
costs?

Should we hire temporary workers

or full-time employees?
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Accounting Majors
Many accounting graduates
begin working for public
accounting firms. However,
most leave at some point to
work in other organizations.

The IMA estimates that 80%

of professional accountants in
80%
the U.S. work in non-public
accounting environments.
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Certified Management Accountant

A management accountant
who has the necessary qualifications
and who passes a rigorous professional
exam earns the right to be known as a
Certified Management Accountant
(CMA).
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Importance of Ethics
in Business
Ethical practices in business build trust and promote
productive relationships. They are necessary for the
functioning of a market economy.
Ethical behavior involves choosing actions that are
right, proper and just.
Many companies and professional organizations, such
as the Institute
of Management Accountants (IMA),
have written codes of ethics which
serve as guides for employees.
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IMA Code of Ethics for

Management Accountants

Competence

Confidentiality

Integrity

Credibility
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IMA Code of Ethics for

Management Accountants
Follow applicable laws,
regulations and standards.

Maintain
professional Competence
competence.

Prepare complete and clear

reports after appropriate
analysis.
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IMA Code of Ethics for

Management Accountants
Do not disclose confidential
information unless legally
obligated to do so.
Do not use
confidential
information for Confidentiality
personal
advantage.
Ensure that subordinates do not
disclose confidential
information.
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IMA Code of Ethics for

Management Accountants
Avoid conflicts of interest and
advise others of potential
conflicts.

Do not subvert
organization’s
legitimate
Integrity
objectives.

Recognize and communicate

personal and professional
limitations.
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IMA Code of Ethics for

Management Accountants
Avoid activities that could
affect your ability to perform
duties.

Refrain from Refuse gifts or

activities that favors that
could discredit Integrity might
the profession. influence
behavior.
Communicate unfavorable as
well as favorable information.
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IMA Code of Ethics for

Management Accountants
Communicate information
fairly and objectively.

Credibility

Disclose all information that

might be useful to
management.
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End of Chapter 1