The Accountant’s Role

in the Organization
Lecture 1

Marilou Pacho-Garcia, CPA, MBA

 Accounting Disciplines
 Financial Accounting – focus on external user
s and GAAP rules
 Managerial Accounting – focus on internal us
ers and is not necessarily GAAP-driven. Also
provides data for financial accounting. This in
cludes:
 Cost Accounting
 Cost Management

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-2
 Some Major Differences between Fina
ncial and Managerial Accounting
Managerial Financial
Help Managers
Help MakeM
Managers Communicate Fina
Purpose Decisions
ake Decisions ncial Position
Internal Managers External Stakehol
Primary Users Internal Managers ders

Focus Future Oriented Past Oriented

Rules Cost-benefit GAAP

Time Span Varies Annual/Quarter
To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-3
 Strategy and Management Accounting

 Strategy – specifies how an organization mat

ches its own capabilities with the opportunitie
s in the marketplace to accomplish its objectiv
es
 Strategic Cost Management – focuses specifi
cally on the cost dimension within the overall
strategy

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-4
 Strategy and Management Accounting

 Management accounting helps answer questi

ons such as:
 Who are our most important customers?
 What substitute products exist?
 What is our critical resource?
 Will we have enough cash to support our strat
egy?

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-5
 Management Accounting and Value
 Creating value is an important part of plannin
g and implementing strategy
 Value is the usefulness a customer gains fro
m a company’s product or service
 Value Chain is the sequence of business func
tions in which customer usefulness is added t
o products or services

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-6
 Management Accounting and Value
 The Value Chain:
 Research and Development
 Design
 Production
 Marketing
 Distribution
 Customer Service
 Management accounting can provide information in e
ach of these areas
 Analysis can also include the supply chain

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-7
 Key Success Factors
 The dimensions of performance that custome
rs expect, and that are key to the success of
a company include:
 Cost and efficiency
 Quality
 Time
 Innovation

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-8
 Planning and Control Systems
 Planning selects goals, predicts results, decid
es how to attain goals, and communicates thi
s to the organization
 Budget – the most important planning tool
 Control takes actions that implement the plan
ning decision, decides how to evaluate perfor
mance, and provides feedback to the organiz
ation

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-9
 Management Accounting Roles
 Problem Solver
 Scorekeeper
 Attention Director

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-10
 Management Accounting Guidelines
 Cost – benefit approach is commonly used: b
enefits generally must exceed costs as a basi
c decision rule
 Behavioral and Technical Considerations – pe
ople are involved in decisions, not just dollars
and cents
 Different definitions of cost may be used for di
fferent applications

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-11
 Organizational Structure and the Mana
gement Accountant
 A typical structure might include:
 CEO
 CFO
 Controller – responsible for managerial and financial
accounting
 Treasury
 Risk Management
 Taxation
 Internal Audit

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-12
 Professional Ethics
 The four standards of ethical conduct for man
agement accountants as advanced by the Ins
titute of Management Accountants:
 Competence
 Confidentiality
 Integrity
 Changed from Objectivity to Credibility

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-13
THE END OF PRESENTAT
ION

Marilou Pacho-Garcia, CPA, MBA

 QUIZ#1

STRICTLY NO ERASURE
 TRUE or FALSE
STRICKLY NO ERASURE
1. Financial accounting reports are useful not only
to internal management but also to external
users.

2. The cost accounting system is the link between

planning and control in the decision making
cycle.

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-16
 TRUE or FALSE
STRICKLY NO ERASURE
3. Planning involves the establishment of goals and
the selection of courses of action to achieve
those goals.

4. Financial accounting and management

accounting maybe referred to as external
accounting and internal accounting respectively.

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-17
 TRUE or FALSE
STRICKLY NO ERASURE
5. Management accounting tends to be more
oriented to the future than is financial
accounting, and it deals more frequently with
the organization as a whole than with
subdivisions of the organizations.
6. Management accounting focuses on the needs
of external users such as investors and creditors.

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-18
 TRUE or FALSE
STRICKLY NO ERASURE
7. Financial accounting focuses primarily on
providing information to managers to help them
carry out their functions of planning, controlling,
performance evaluation and decision making.

8. Management accounting does not have to follow

generally accepted accounting principles (GAAP).

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-19
 TRUE or FALSE
STRICKLY NO ERASURE
9. Cost accounting information is part of
management accounting, but companies also
use cost accounting in the preparation of
financial statements.
10. The primary objective of cost and managerial
accounting is to assist the government in the
planning and control functions .

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-20
 Enumerations
STRICKLY NO ERASURE
1-3 External Users of financial statements

4-6 Internal Users of financial statements

7-10 Standards of ethical conduct of management

accountant

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-21
ANSWERS
 TRUE or FALSE
STRICKLY NO ERASURE
1. Financial accounting reports are useful not only
to internal management but also to external
users. TRUE

2. The cost accounting system is the link between

planning and control in the decision making
cycle. TRUE

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-23
 TRUE or FALSE
STRICKLY NO ERASURE
3. Planning involves the establishment of goals and
the selection of courses of action to achieve
those goals. TRUE

4. Financial accounting and management

accounting maybe referred to as external
accounting and internal accounting respectively.
TRUE

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-24
 TRUE or FALSE
STRICKLY NO ERASURE
5. Management accounting tends to be more
oriented to the future than is financial
accounting, and it deals more frequently with
the organization as a whole than with
subdivisions of the organizations. FALSE
6. Management accounting focuses on the needs
of external users such as investors and creditors.
FALSE

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-25
 TRUE or FALSE
STRICKLY NO ERASURE
7. Financial accounting focuses primarily on
providing information to managers to help them
carry out their functions of planning, controlling,
performance evaluation and decision making.
FALSE
8. Management accounting does not have to follow
generally accepted accounting principles (GAAP).
TRUE

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-26
 TRUE or FALSE
STRICKLY NO ERASURE
9. Cost accounting information is part of
management accounting, but companies also
use cost accounting in the preparation of
financial statements. TRUE
10. The primary objective of cost and managerial
accounting is to assist the government in the
planning and control functions . FALSE

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-27
 Enumerations
STRICKLY NO ERASURE
1-3 External Users 4-6 Internal Users
1. Government 1. Employees
2. Suppliers 2. Managers
3. Creditors/Lenders 3. Board of Directors
4. Investors 7-10 Ethical Standards
7. Competence
8. Confidentiality
9. Integrity
10. Objectivity/Credibility
To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 1-28