Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
CHAPTER 1
THE ACCOUNTANT’S ROLE IN THE ORGANIZATION
LEARNING OBJECTIVES
1. Describe how cost accounting supports management accounting and financial accounting
2. Understand how management accountants affect strategic decisions
3. Distinguish between the planning and control decisions of managers
4. Distinguish among the problem-solving, scorekeeping, and attention-directing roles of management accountants
5. Identify four themes managers need to consider for attaining success
6. Describe the set of business functions in the value chain
7. Describe three ways management accountants support managers
8. Understand how management accounting fits into an organization’s structure
9. Understand what professional ethics mean to management accountants
CHAPTER OVERVIEW
Chapter 1 is an important foundation chapter. The theme of the text, Cost Accounting: A Managerial Emphasis, 11/E, is the major role
that accounting plays in management decision making. Accounting provides information managers need when making decisions. Financial
accounting provides information to external managers while modern cost accounting yields insights into what managers and accountants do within
an organization. Management accountants provide financial and nonfinancial information to help managers decide how best to deal with challenges
and opportunities.
Management accounting is successful when it provides information that improves managers’ strategic, planning, and control decisions.
The use of accounting in the planning and control process is introduced and highlighted in the text example.
A framework for understanding management accounting systems in providing managers information is developed in the chapter. The
goals, roles, activities, and guidelines of management accounting systems are described through understanding what managers do.
An introduction and discussion of professional ethics including standards of ethical conduct for management accountants is presented.
CHAPTER OUTLINE
Learning Objective 1:
Describe how cost accounting supports management accounting and financial accounting
I. Accounting systems: processing information from economic events into useful information for managers and others
A. Purpose of cost accounting: to provide information
1. Identifying and measuring financial and other information related to the acquisition or consumption of an organization’s resources
2. Providing users of economic information (managers) useful reports and access to needed information
B. Cost accounting: provides information relating to cost of acquiring and utilizing resources for both management and financial accounting
1. Management accounting: focus on internal reporting for decision making of managers in fulfilling organization’s goals
a. Emphasis on the organization—the future and influencing behavior of managers and employees
b. Concern with development and implementation of strategies and policies
2. Financial accounting: focus on external reporting for decision making of those outside the organization
a. Emphasis on financial statements
b. Strict adherence to GAAP
3. Cost management
a. Approaches and activities of managers in planning and control
b. Integral part of general management strategies and their implementation
Do multiple choice 1. Assign Exercise 1-16.
Learning Objective 2:
Understand how management accountants affect strategic decisions
II. Strategic decisions and management accounting: key to a company’s success in creating value for customers while differentiating itself from its
competitors
A. Providing information about the sources of competitive advantage
1. Strategy: how an organization uses what it has to get what it wants within the marketplace
2. Two broad strategies used
a. Providing a quality product or service at a lower price than competitors
b. Providing a unique product or service at a higher price than competitors
3. Role of management accountant: provide managers information in helping formulate strategy
B. Identifying and building resources and capabilities
1. Strategic analysis: matching knowledge of marketplace opportunities and threats with company’s resources and capabilities
2. Balance sheet information about assets
a. Current resources
i. Cash adequacy
ii. Inventory management
b. Long-term productive assets: important strategic decisions for the right investments
i. Analyze trends and measure efficiencies
ii. Develop network of relationships with customers and suppliers
iii. Identify financial and nonfinancial costs and benefits associated with alternative choices
c. Intangible assets
Do multiple choice 2. Assign Exercise 1-16 (if not previously assigned).
Learning Objective 3:
Distinguish between the planning and control decisions of managers
III. Management accountant’s role in implementing strategy [Exhibits 1 and 2]
A. Implementing strategy: managers taking action by using planning and control systems to help the collective decisions of an
organization
1. Planning
a. Thinking process
i. Selecting organization goals
ii. Predicting results under various alternatives of achieving those goals
iii. Deciding how to attain desired goals
b. Communicating goals and how to attain them to entire organization
2. Control
a. Taking actions to implement the planning decisions
b. Deciding on performance evaluation
3. Feedback: linking planning and control to help future decision making
TEACHING TIP: The decision-making process is akin to the thinking process. Individuals as well as groups of all types and sizes employ
common elements in making decisions. The key for the use of accounting in the process is usually in “determining relevant information” but may
be used in each stage. Chapter 11 expands upon this process. An interesting reading on group decision making is from Fortune, October 5, 1992,
“How Public Opinion Really Works,” pages 102–108, written by Daniel Yankelovich.
Feedback is an interesting aspect to explore as it highlights the ongoing nature of decision making. One can give numerous examples to prove the
adage that in solving one problem, several more problems are created.
Do multiple choice 3. Assign Problem 1-25.
Learning Objective 4:
Distinguish among the problem-solving, scorekeeping, and attention-directing roles of management accountants
B. Supporting managers by providing information to improve strategic, planning, and control decisions
1. Three roles of management accountants for success
a. Problem solving: comparative analysis for decision making
b. Scorekeeping: accumulating data and reporting reliable results
c. Attention directing: helping managers properly focus their attention
2. Goals to assist managers in making better decisions [Survey of Company Practice]
a. Different decisions emphasize roles differently
i. Strategy and planning emphasize problem solving
ii. Control emphasizes scorekeeping and attention directing
b. Interaction among types of decisions means activity/roles done simultaneously
2 Chapter 1
c. Information must be relevant and timely to be useful
Do multiple choice 4 and 5. Assign Problems 1-26 and Exercise 1-17 or 1-18.
Learning Objective 5:
Identify four themes managers need to consider for attaining success
C. Enhancing the value of management accounting systems by guiding managers to focus on challenges [Concepts in Action]
1. Customer focus [Exhibit 1-3]
Learning Objective 6:
Describe the set of business functions in the value chain
2. Value-chain and supply-chain analysis [Exhibits 1-4 and 1-5]
a. Companies add value through—
i. Research and development
ii. Design of products, services, or processes
iii. Production
iv. Marketing
v. Distribution
vi. Customer service
b. Managers in all business functions are customers of management accounting information
3. Key success factors
a. Cost and efficiency
b. Quality
c. Time
d. Innovation
4. Continuous improvement and benchmarking
Do multiple choice 6 and 7. Assign Exercises 1-19 or 1-20 and 1-22.
Learning Objective 7:
Describe three ways management accountants support managers
D. Providing the most value through three key management accounting guidelines
1. Employ cost-benefit approach
2. Recognize behavioral and technical considerations
3. Identify different costs for different purposes
Do multiple choice 8. Assign Problem 1-24.
Learning Objective 8:
Understand how management accounting fits into an organization’s structure
E. Working within the organization
1. Line and staff relationships [Exhibit 1-6]
2. The chief financial officer and the controller
Do multiple choice 9. Assign Problem 1-27.
Learning Objective 9:
Understand what professional ethics mean to management accountants
IV. Professional ethics
A. Guidelines
1. IMA certification programs
2. IMA Standards of Ethical Conduct for Management Accountants [Exhibit 1-7]
a. Competence
b. Confidentiality
c. Integrity
d. Objectivity
B. Typical challenges: Guidance as to “Resolution of Ethical Conduct” [Exhibit 1-8]
Do multiple choice 10. Assign Exercise 1-23 and Problems 1-28 and 1-29.
CHAPTER QUIZ
7. Four themes are common to many managers. The critical theme for all of these is
a. developing relationships with suppliers.
b. benchmarking and continuous improvement.
c. reducing costs and improving efficiencies.
d. improving customer focus and customer satisfaction.
9. ________ management exists to provide advice and assistance to those responsible for attaining the objectives of the organization.
a. Line
b. Functional
c. Staff
d. Risk
4 Chapter 1
10. Which of the following is not one of the ethical responsibilities of a management accountant?
a. Compliance
b. Confidentiality
c. Integrity
d. Objectivity
WRITING/DISCUSSION EXERCISES
1. Describe how cost accounting supports management accounting and financial accounting
What are some basic characteristics of accounting that all accountants use whether in financial or managerial accounting?
The Financial Accounting Standards Board (FASB) describes a hierarchy of accounting qualities in its second Statement of Financial
Accounting Concepts. The characteristics deemed important for financial accounting are the same as those described throughout the text as
those of managerial accounting. The Concepts describe the users of accounting information as “decision makers” with the constraints of
cost/benefit and materiality. The qualities of accounting information are given as “understandability, decision usefulness, relevance, and
reliability.” Relevance is further described by the terms “predictive value, feedback value, and timeliness.” Reliability is characterized by
“verifiability, neutrality, and representational faithfulness.” The additional quality of comparability, including consistency, belongs to the
descriptors of decision usefulness. These qualities apply to all accounting information, financial or managerial, in processing any economic
transaction that have occurred into information useful for making decisions.
The definition given for accounting by the 1941 Committee on Terminology of the American Institute of Accountants is “. . . the art
of recording, classifying, and summarizing in a significant manner and in terms of money, transactions, and events which are in part, at least,
of a financial character, and interpreting the results thereof.” This definition was before the study of cost accounting as an academic subject,
but note the statement from the current text about accounting systems—“Processing any economic transactions entails collecting, categorizing,
summarizing, and analyzing.” Some basic characteristics define accounting.
From FASB Statement of Financial Accounting Concepts No. 2 (Stamford, CT: FASB, 1980)
4. Distinguish among the problem-solving, scorekeeping, and attention-directing roles of management accountants
Describe the steps in making a decision in terms of the roles of management accountants. Using the example given in Learning Objective
3 above, the keeping of a study log would be an example of scorekeeping. Comparing the log of how the time was actually spent to the
planned usage of time spent would be an example of attention directing. Evaluating or analyzing the results of time spent and grades earned
is an example of problem solving because of the characteristic of relevance in providing feedback and predictive value as to how time should
be spent and for what it should be spent doing.
Students could provide other examples of the use of problem solving, scorekeeping, and attention directing, especially in the area of sports.
6 Chapter 1
SUGGESTED READINGS
Bhide, A. & Stevenson, H., “Why Be Honest if Honesty Doesn’t Pay?” Harvard Business Review (September-October 1990) p.121 [9p].
Brooks, L., Business and Professional Ethics for Accountants (2000) South-Western College Publishing, Cincinnati OH.
Cisco, S. & Strong, K., “The Value Added Information Chain,” Information Management Journal (January 1999) p.4 [9p].
Frost, P., “Why Compassion Counts!” Journal of Management Inquiry (June 1999) p.127 [7p].
Guilding, C., Cravens, K. & Tayles, M., “An International Comparison of Strategic Management Accounting Practices,” Management
Accounting Research (March 2000) p.113 [23p].
Halal, W., “Corporate Community: A Theory of the Firm Uniting Profitability and Responsibility,” Strategy and Leadership (January 2000) p.
10 [7p].
Howard, R., “Values Make the Company: An Interview with Robert Haas,” Harvard Business Review (September-October 1990) p.134 [11p].
Litman, J., “Genuine Assets: Building Blocks of Strategy and Sustainable Competitive Advantage,” Strategic Finance (November 2000) p.37
[6p].
Martinson, O. and Ziegenfuss, D., “Looking at What Influences Ethical Perception and Judgment,” Management Accounting Quarterly (Fall
2000) p.41 [7p].
Michlitsch, J., “High-Performing, Loyal Employees: The Real Way to Implement Strategy,” Strategy and Leadership (January 2000) p.28 [6p].
Moriarity, S., “Trends in Ethical Sanctions within the Accounting Profession,” Accounting Horizons (December 2000) p.427 [13p].
Moye, J. and Upton, D., “Data Warehousing 101,” Strategic Finance (February 2001) p.34 [5p].
Thorne, L., “The Development of Two Measures to Assess Accountants’ Prescriptive and Deliberate Moral Reasoning,” Behavioral Research
in Accounting (Vol. 12—2000) p.139 [31p].
Weber, J. & Wasieleski, D., “Investigating Influences on Managers’ Moral Reasoning,” Business and Society (March 2001) p.79 [33p].
West III, G.P. & DeCastro, J., “The Achilles Heel of Firm Strategy: Resource Weaknesses and Distinctive Inadequacies,” Journal of
Management Studies (May 2001).