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WELCOME

Dr. Emon Kalyan Chowdhury


Ph.D. in Accounting, MBA in Accounting, MBA in Finance, MBA in HRM
Associate Professor & Head
Department of Accounting
CIU Business School
Chittagong Independent University.
Course objective

This course aims to create value for the


organization by managing resources,
people, and over general activities and its
importance for the management of a firm. It
helps to improve the effectiveness of both
the management planning and control
functions.

Irwin/McGraw-Hill 2 © The McGraw-Hill Companies, Inc., 2002


Course Contents

 Managerial accounting and the Business


Environment
 Cost Behavior & Cost Classification
 Cost – Volume – Profit Relationship
 Profit Planning
 Relevant costs and Decision Making
 Segment Reporting, Decentralization &
Transfer Pricing
Irwin/McGraw-Hill 3 © The McGraw-Hill Companies, Inc., 2002
Textbook

Managerial Accounting by
Ray H. Garrison, Eric W.
Noreen and Peter C.
Brewer, Published by
McGraw-Hill/Irwin, 13th
edition.

Irwin/McGraw-Hill 4 © The McGraw-Hill Companies, Inc., 2002


Grading requirements

First Term (Class attendance, viva, Class test,


presentation) 40%
Mid term 20%
Final 40%
Total 100%

Irwin/McGraw-Hill 5 © The McGraw-Hill Companies, Inc., 2002


Grading System

CIU Existing Grading System


Letter
UGC Prescribed Grading System 2018 onwards Numerical Grade Grade
Letter 90% and above A
Numerical Grade Grade 85% to less than 90% A-
80% and above A+ 80% to less than 85% B+
75% to less than 80% A 75% to less than 80% B
70% to less than 75% A-
70% to less than 75% B-
65% to less than 70% B+
65%to less than 70% C+
60% to less than 65% B
60% to less than 65% C
55%to less than 60% B-
55% to less than 60% C-
50% to less than 55% C+
45% to less than 50% C 50% to less than 55% D+
40% to less than 45% D 45% to less than 50% D
Less than 40% F Less than 45% F
Irwin/McGraw-Hill 6 © The McGraw-Hill Companies, Inc., 2002
Managerial Accounting

Managerial accounting, also known as cost


accounting, is the process of identifying,
measuring, analyzing, interpreting, and
communicating information to managers
for the pursuit of an organization's goals.

 It generates information
 For managers/decision makers
 To take business decision

Irwin/McGraw-Hill 7 © The McGraw-Hill Companies, Inc., 2002


Managerial Accounting and
Financial Accounting

Managerial accounting Financial accounting


provides information provides information
for managers inside an to stockholders,
organization who creditors and others
direct and control who are outside
its operations. the organization.

Irwin/McGraw-Hill 8 © The McGraw-Hill Companies, Inc., 2002


Management Accountants
 Help management pursue the firm’s
goals
 Internal consultants or business analysts
 Time spent interpreting data
 Work on cross-functional teams
 Extensive face-to-face communications
 Actively involved in decision making
 Trusted advisors

Irwin/McGraw-Hill 9 © The McGraw-Hill Companies, Inc., 2002


Differences Between Financial and
Managerial Accounting

Financial Accounting Managerial Accounting


1. Users External persons who Managers who plan for
make financial decisions and control an organization
2. Time focus Historical perspective Future emphasis
3. Verifiability Emphasis on Emphasis on relevance
versus relevance verifiability for planning and control
4. Precision versus Emphasis on Emphasis on
timeliness precision timeliness
5. Subject Primary focus is on Focuses on segments
the whole organization of an organization
6. Requirements Must follow GAAP Need not follow GAAP
and prescribed formats or any prescribed format

Irwin/McGraw-Hill 10 © The McGraw-Hill Companies, Inc., 2002


The Changing Business
Environment

A more competitive
environment emphasizing:
 Higher quality products
 Lower prices and costs
 Global competition Business environment
changes in the past
 Meeting and anticipating
customer needs twenty years

Irwin/McGraw-Hill 11 © The McGraw-Hill Companies, Inc., 2002


International Competition

Meeting world-class competition demands


a world-class management accounting
system.

Irwin/McGraw-Hill 12 © The McGraw-Hill Companies, Inc., 2002


Organizational Structure
An organization is a group of people
united for a common purpose.

Corporate Organization Chart


Board of Directors

President

Purchasing Personnel Vice President Chief Financial


Operations Officer

Treasurer Controller
Irwin/McGraw-Hill 13 © The McGraw-Hill Companies, Inc., 2002
Decentralization
Decentralization is the delegation of decision-
making authority throughout an organization.

Corporate Organization Chart


Board of Directors

President

Purchasing Personnel Vice President Chief Financial


Operations Officer

Treasurer Controller
Irwin/McGraw-Hill 14 © The McGraw-Hill Companies, Inc., 2002
Decentralization
Advantages of Decentralization
1. Diversification of activities
2. Development of the Managerial Personnel
3. Effective Control and Supervision
4. Improvement of morale
5. Quick and wise decision possible
6. Better utilization of Management
7. Employee Management
8. Reduces the Burden of Top Executives
9. Flexibility etc.

Irwin/McGraw-Hill 15 © The McGraw-Hill Companies, Inc., 2002


Decentralization
Disadvantages of Decentralization
1. Problems of coordination
2. Increases the administrative expenses
3. High Cost of Operation
4. Lack of Uniformity
5. Unsuitable for Small Firms
6. Reliance on the Manager
7. Self Centered Attitude etc.

Irwin/McGraw-Hill 16 © The McGraw-Hill Companies, Inc., 2002


Importance of Ethics
in Business
 Ethical practices in business build trust and
promote productive relationships. They are
necessary for the functioning of a market
economy.
 Many companies and professional
organizations, such as the Institute
of Management Accountants (IMA),
have written codes of ethics which
serve as guides for employees.

Irwin/McGraw-Hill 17 © The McGraw-Hill Companies, Inc., 2002


IMA Code of Ethics for
Management Accountants

Competence

Confidentiality

Integrity

Objectivity

Resolution of Ethical Conflict

Irwin/McGraw-Hill 18 © The McGraw-Hill Companies, Inc., 2002


COMPETENCE

1. Maintain an appropriate level of professional expertise


by continually developing knowledge and skills.
2. Perform professional duties in accordance with
relevant laws, regulations, and technical standards.
3. Provide decision support information and
recommendations that are accurate, clear, concise,
and timely.
4. Recognize and communicate professional limitations
or other constraints that would preclude responsible
judgment or successful performance of an activity.

Irwin/McGraw-Hill 19 © The McGraw-Hill Companies, Inc., 2002


CONFIDENTIALITY

1. Keep information confidential except when


disclosure is authorized or legally required.
2. Inform all relevant parties regarding
appropriate use of confidential information.
Monitor subordinates’ activities to ensure
compliance.
3. Refrain from using confidential information for
unethical or illegal advantage

Irwin/McGraw-Hill 20 © The McGraw-Hill Companies, Inc., 2002


INTEGRITY

1. Mitigate actual conflicts of interest. Regularly


communicate with business associates to
avoid apparent confl icts of interest. Advise all
parties of any potential conflicts.
2. Refrain from engaging in any conduct that
would prejudice carrying out duties ethically.
3. Abstain from engaging in or supporting any
activity that might discredit the profession.

Irwin/McGraw-Hill 21 © The McGraw-Hill Companies, Inc., 2002


CREDIBILITY

1. Communicate information fairly and


objectively.
2. Disclose all relevant information that could
reasonably be expected to infl uence an
intended user’s understanding of the reports,
analyses, or recommendations.
3. Disclose delays or defi ciencies in information,
timeliness, processing, or internal controls in
conformance with organization policy and/or
applicable law.

Irwin/McGraw-Hill 22 © The McGraw-Hill Companies, Inc., 2002


IMA Code of Ethics for
Management Accountants
Resolution of Ethical Conflict
Follow established policies.
For unresolved ethical conflicts:
 Discuss the conflict with immediate superior.
 If immediate superior is the CEO, consider the
board of directors or the audit committee.
 Except where legally prescribed, maintain
confidentiality.

Irwin/McGraw-Hill 23 © The McGraw-Hill Companies, Inc., 2002


IMA Code of Ethics for
Management Accountants
Resolution of Ethical Conflict
Clarify issues in a confidential discussion with
an objective advisor.
Consult an attorney as to legal obligations.
The last resort is to resign.

Irwin/McGraw-Hill 24 © The McGraw-Hill Companies, Inc., 2002