CHAPTER 1

The Accountants Role in the

Organization

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Accounting Discipline Overview

Managerial Accounting
measure/analyze/report financial and nonfinancial information
Support managerial decision-making in pursuit of company goals

Financial Accounting
Prepare financial statements in accordance with GAAP
Report financial information to external stakeholders

Tax Accounting
Prepare financial information in accordance with Internal Revenue Code
Structure transactions to minimize tax cost of doing business

Auditing
Check the work of other accountants(e.g., internal auditor, external
auditor, tax auditor)
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Major Differences Between

Financial & Managerial Accounting
Managerial
Accounting

Financial
Accounting

Purpose

Decision making

Communicate to
outsiders

Primary
Users

Internal managers

External users

Future

Past

Rules

Cost vs. benefit

GAAP compliant;
audited

Time Span

Varies with job

Monthly, quarterly

Behavioral
Issues

Intended to influence
employees

Doesnt directly affect

employees

Focus/Empha
sis

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Strategy & Management Accounting

Strategy
How an organization matches its capabilities with market
opportunities to accomplish company objectives

Strategic Cost Management

Focuses on cost as a component of strategy

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Strategy & Management Accounting

Typical management accounting questions:

Who are our important customers and what do they want?
What substitute products exist and how is our product
different?
What is our critical capability?
Do we have enough cash, or shall we borrow cash?

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Management Accounting and Value

Value
The usefulness a customer gains from a product or
service

Creating value
The goal that underlies planning and implementing
strategy

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Management Accounting and Value

Value Chain
The sequence of business functions in which value is added to
products
1. Research & Development
2. Design
3. Production
4. Marketing
5. Distribution
6. Customer Service

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Key Success Factors

Performance dimensions that customers require:
1.
2.
3.
4.

Cost and efficiency

Quality
Time
Innovation

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Planning & Control Systems

Planning
select goals
predict results
decide how to attain goals
communicate plans to the organization
Budget the most important planning tool

Control
implement the decision
evaluate performance
provide feedback to the organization

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A Five-Step Decision Making Process

in Planning & Control

Planning

Control

1.

Identify the problem and

uncertainties

2.

Obtain information

3.

Make predictions about the future

4.

Make decisions by choosing between

alternatives

5.

Implement the decision, evaluate

performance, and learn

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Management Accounting Guidelines

Cost Benefit Analysis
a basic rule; benefits must exceed costs of decisions

Behavioral & Technical Considerations

Decisions must consider people and be technically correct

Different costs are used for different purposes

Ex., Cost of a product may include just direct costs or full
lifetime costs

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Typical Organizational Structure and

the Management Accountant

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Professional Ethics
Standards of ethical conduct for management
accountants (Source: IMA)
1.
2.
3.
4.

Competence
Confidentiality
Integrity
Credibility

2009 Pearson Prentice Hall. All rights reserved.