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Chapter One

The Changing Role of Managerial Accounting in a Dynamic Business Environment

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Managing Resources, Activities, and People

An organization . . .

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Directing

Acquires Resources

Organized set of activities

Decision Making

Controlling

Planning

Hires People
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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 activities, managers, and other employees. Assessing the organizations competitive position.
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The Balanced Scorecard

How do we look to owners?

Financial Perspective Goals Measures

In which activities must we excel?

Customer Perspective Goals Measures

How do customers see us?

Operations Perspective Goals Measures

Innovation Perspective Goals Measures

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How can we continue to improve?

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Managerial versus Financial Accounting

Accounting System (accumulates financial and managerial accounting data)
Managerial Accounting Information for decision making, and control of an organizations operations. Internal Users
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Financial Accounting Published financial statements and other financial reports. External Users
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Managerial versus Financial Accounting

Managerial Accounting Users of information Managers within company Regulation Financial Accounting Interested outside parties

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Required. Must comform to Not required because for internal GAAP which is regulated by use only FASB and SEC. Basic accounting system plus Almost exclusively from the Source of Data various other sources basic accounting system Reports often focus on subunits. Reports focus on the enterprise Nature of Reports Based on a combination of in its entirety. Based on and Procedures historical data, estimates, and historical transactions. projections of future events.

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Line and Staff Positions

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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Controller
The chief managerial and financial accountant responsibility for:
Financial

planning and analysis. Cost control. Financial reporting. Accounting information systems.

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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.

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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.

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Role of Managerial Accountant

Organization Chart
Stockholders Board of Directors

President
Controller Treasurer Vice President Production Vice President Sales

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Major Themes in Managerial Accounting

Behavioral Issues

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Information and Incentives

Costs and Benefits

Managerial Accounting
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Evolution and Adaptation in Managerial Accounting

Service Vs. Manufacturing Firms
Emergence of New Industries Global Competition Focus on the Customer Cross-Functional Teams Continuous Improvement
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Computer-Integrated Manufacturing
Information and Communication Technology Product Life Cycles Total Quality Management Time-Based Competition Just-in-Time Inventory
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Change

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Cost Management Systems

Objectives
Measure the cost of resources consumed. Identify and eliminate non-valueadded costs.

Cost Management System

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Cost Management Systems

Objectives
Measure the cost of resources consumed. Identify and eliminate non-valueadded costs.
Determine efficiency and effectiveness of major activities. Identify and evaluate new activities that can improve performance.

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Strategic Cost Management and the Value Chain

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

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Marketing

Distribution Customer Service

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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

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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

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Professional Ethics
Ethical business practices build trust and promote loyal, productive relationships with customers, employees and suppliers. Many companies have written codes of ethics which serve as guides for employees to follow.

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Professional Ethics
Competence

Confidentiality
Integrity

Objectivity
Resolution of Ethical Conflict

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Professional Ethics
Follow applicable laws, regulations and standards. Maintain professional competence.

Competence
Prepare complete and clear reports after appropriate analysis.

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Professional Ethics
Do not disclose confidential information unless legally obligated to do so.

Do not use confidential information for personal advantage.

Confidentiality
Ensure that subordinates do not disclose confidential information.

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Professional Ethics
Avoid conflicts of interest and advise others of potential conflicts. Do not subvert organizations legitimate objectives.

Integrity

Recognize and communicate personal and professional limitations.

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Professional Ethics
Avoid activities that could affect your ability to perform duties. Refrain from activities that could discredit the profession. Refuse gifts or favors that might influence behavior.

Integrity
Communicate unfavorable as well as favorable information.

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Professional Ethics
Communicate information fairly and objectively.

Objectivity

Disclose all information that might be useful to management.

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Professional Ethics
Resolution of Ethical Conflict
Follow established policies of your organization.
If unresolved or if policy does not exist:
Clarify relevant concepts in a confidential discussion with an objective advisor to explore possible courses of action.
Discuss problem with immediate supervisor.

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Professional Ethics
Resolution of Ethical Conflict
If immediate supervisor is involved in the
unethical behavior, discuss at the next level.

If problem is not resolved, the last resort is to

resign.

Generally, do not communicate ethical conflicts

to outsiders.

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End of Chapter 1

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