Chapter 1

The Changing Role

of Managerial
Accounting in a
Dynamic Business
Environment

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 Learning
Objective
1

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Define Managerial Accounting

Managerial accounting is the process of

 Identifying
 Measuring
 Analyzing
 Interpreting
 Communicating information
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Objective
2

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 Managing Resources, Activities,
and People
An organization . . .
Directing

Acquires Resources Decision

Organized set Making
of activities

Controlling Planning
Hires People
 Learning
Objective
3

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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 organization’s goals.
• Measuring performance of activities, managers,
and other employees.
• Assessing the organization’s competitive position.
 The Balanced Scorecard
How do we look Financial Perspective
to owner’s? Goals Measures

In which activities
must we excel?

Customer Perspective Operations Perspective

Goals Measures Goals Measures
How do customers
see us?

How can we
Innovation Perspective
continue to
Goals Measures improve?
 Learning
Objective
4

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 Managerial versus Financial
Accounting
Accounting System
(accumulates financial and
managerial accounting data in the
cost accounting system)

Managerial Accounting Financial Accounting

Information for decision Published financial
making, planning, and statements and other
controlling an financial reports.
organization’s
operations.
Internal External
Users Users
 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 Required and must conform to generally accepted
only for management. 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 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 a data.
combination of historical data, estimates, and
projections of future events.
 Learning
Objective
5

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 Line and Staff Positions
• A line position is directly • A staff position supports
involved in achieving the and assists line positions.
basic objectives of an – Example: A cost
organization. accountant in the
manufacturing plant.
– Example: A production
supervisor in a
manufacturing plant.
 Learning
Objective
6

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 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
 Treasurer
Responsible for raising capital and safeguarding the
organization’s assets.
– Supervises relationships with financial institutions.
– Work with investors and potential
investors.
– Manages investments.
– Establishes credit policies.
– Manages insurance coverage
 Internal Auditor
Responsible for reviewing accounting procedures,
records, and reports in both the controller’s and the
treasurer’s area of responsibility.
– Expresses an opinion to top
management regarding the
effectiveness of the
organizations accounting
system.
 Learning
Objective
7

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 Major Themes in Managerial
Accounting
Behavioral Costs and
Issues Benefits

Information Evolution and

and Incentives Adaptation

Managerial
Accounting
 Evolution and Adaptation in
Managerial Accounting
E-Business
Service vs. Product Life Cycles
Manufacturing Firms
Time-Based
Competition
Emergence of New
Industries Change Information and
Communication
Global Competition Technology

Focus on the Customer Just-in-Time Inventory

Cross-Functional Teams Total Quality Management

Computer-Integrated Continuous Improvement

Manufacturing
 Cost Management Systems
Objectives
➊ Measure the cost of
resources consumed.
➋ Identify and eliminate
non-value-added Cost
costs. Management
System
 Cost Management Systems
Objectives
❸ Determine efficiency
and effectiveness of
major activities.
❹ Identify and evaluate
new activities that Cost
Management
can improve System
performance.
 Learning
Objective
8

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 Strategic Cost Management and
the Value Chain
Product
Design
Production
Research
and
Development Marketing

Securing raw
materials and Distribution
other resources

Customer
Start Service
 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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Objective
9

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 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.
 Learning
Objective
10

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 Managerial Accounting as a
Career
Professional Organizations
Institute of Management Accountants (IMA)

Develops
Publishes Administers
Standards of
Management Certified
Ethical
Accounting Management
Conduct for
and research Accountant
Management
studies. program
Accountants
Professional Ethics

✔Competence
✔Confidentiality
✔Integrity
✔Credibility
End of Chapter 1