Chapter 1

The Changing Role of Managerial Accounting

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Learning Objectives
1. Define managerial accounting and describe its role in the management process. 2. Explain four fundamental management processes that help organizations attain their goals. 3. List and describe five objectives of managerial accounting activity.
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Learning Objectives (cond)

4. Explain the major differences between managerial and financial accounting. 5. Explain where managerial accountants are located in an organization, in terms of formal organization, deployment in cross-functional teams, and physical location. 6. Describe the roles of an organization's chief financial officer (CFO) or controller, treasurer, and internal auditor.
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Learning Objectives (cond)

7. Briefly describe some of the major contemporary themes in managerial accounting. 8. Understand and explain the concepts of strategic cost management and the value chain. 9. Understand the ethical responsibilities of a managerial accountant. 10. Discuss the professional organizations, certification process, and ethical standards in the field of managerial accounting.
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Learning Objective 1
Define Managerial Accounting
Managerial accounting is the process of
identifying measuring analyzing interpreting communicating information

in pursuit of organizational goals.

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Managing Resources, Activities, and People

An organization . . .
Directing

Learning Objective 2

Acquires Resources

Organized set of activities

Decision Making

Controlling

Planning

Hires People
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How Managerial Accounting Adds Value to the Organization

Learning Objective 3

Providing information for decision making and planning. Assisting managers in directing and controlling activities. Motivating managers and other employees towards organizations goals. Measuring/evaluating performance of subunits, activities, managers, and other employees. Assessing the organizations competitive position.
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Learning Objective 4 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. Internal Users Financial Accounting Published financial statements and other financial reports.

External Users
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Managerial versus Financial Accounting (cond)

Financial Accounting Interested parties, outside the organization. Required and must conform to generally accepted accounting principles. Regulated by the Accounting Standards Board of the Canadian Institute of Chartered Accountants(CICA), and, to a lesser degree, by Canada's provincial and territorial.securties regulators. Source of Data The organization's basic accounting system, plus Almost exclusively drawn from the organization's various other sources, such as rates of effective basic accounting system, which accumulates products manufactured, physical quantities of financial information. material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays in airlines. Nature of Reports and Reports often focus on subunits within the Reports focus on the enterprise in its entirety. Procedures organization, such as departments, divisions, Based almost exclusively on historical transaction geographical regions, or product lines. Based on data. a combination of historical data, estimates, and projections of future events. Managerial Accounting Users of Information Managers, within the organization. Regulation Not required and unregulated, since it is intended only for management.

LO-4

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Line and Staff Positions

Learning Objective 5

A line position is directly involved in achieving the basic objectives of an organization.

A staff position supports and assists line positions.

Example: A production supervisor in a manufacturing plant.

Example: A cost accountant in the manufacturing plant.

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Management Accountants
An accountant in a accounting firm would be in a line position, because the organization's mission is providing accounting services. In contrast, an accountant at a university would be in a staff position.

LO-5

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Management Accountants (cond)

More and more, managerial accountants work throughout an entire enterprise and are deployed in cross-functional management teams, working with top executives and personnel from a variety of functional areas (e.g., marketing, production, engineering, and operations).
LO-5
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Learning Objective 6 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

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Treasurer
Responsible for raising capital and safeguarding the organizations assets.

Manages investments Establishes credit policies Manages insurance coverage

LO-6
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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.

LO-6
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Major Themes in Managerial Accounting

Behavioral Issues Costs and Benefits

Learning Objective 7

Information and Incentives

Evolution and Adaptation

Managerial Accounting
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Evolution and Adaptation in Managerial Accounting

E-Business

Service vs. Manufacturing Firms Emergence of New Industries Globalization

Focus on the Customer Computer-Integrated Manufacturing Cross-Functional Teams
LO-7

Product Life Cycles and Diversity Time-Based Competition

Change

Information and Communication Technology Just-in-Time Inventory Total Quality Management

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Cost Management Systems

Objectives
Measure the cost of resources consumed. Identify and eliminate nonvalue-added costs.

Cost Management System

LO-7

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Cost Management Systems (cond)

Objectives

Determine efficiency and effectiveness of major activities. Identify and evaluate new activities that can improve performance.

Cost Management System

LO-7

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Strategic Cost Management and the Value Chain

Product Design Production Research and Development Securing raw materials and other resources

Learning Objective 8

Marketing

Distribution Sales

Start
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Theory of Constraints
A sequential process of identifying and removing constraints in a system.

Restrictions or barriers that impede progress toward an objective

LO-8
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Learning Objective 9
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. There will likely be more reforms in corporate governance and accounting in the future.

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Learning Objective 10
Managerial Accounting as a Career Professional Organizations
Society of Management Accountants of Canada (CMA) Canadian Institute of Management Accountants (CA) Certified General Accountants Association of Canada (CGA)
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Professional Ethics
Competence
Independence Confidentiality Integrity Credibility

LO-10
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