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Financial and Managerial

Accounting: Seven Key Differences

Managerial Accounting:
An Overview
Chapter 1

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

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Work of Management Planning

Plannin Establish
g Controlli Goals.
ng
Decision
Making Specify How Goals
Will Be Achieved.

Develop Budgets.

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Controlling Decision Making

The control function gathers feedback to Decision making involves
ensure that plans are being followed.
making a selection among
competing alternatives.
Feedback in the form of performance reports
that compare actual results with the budget What
are an essential part of the control function. should
we be Who
selling? should
we be How
serving? should
we
execute?
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Managerial Accounting Activities: Managerial Accounting Activities:

Marketing Majors Marketing Majors

Planni Controll
ng ing

How much should we budget for Is the budgeted price cut

TV, print, and internet advertising? increasing unit sales as expected?

How many salespeople should we Are we accumulating too much

plan to hire to serve a new inventory during the holiday
territory? shopping season?

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Managerial Accounting Activities: Managerial Accounting Activities:

Marketing Majors Supply Chain Management Majors
Decisio
Planni
n
ng
Making
Should we sell our services as How many units should we plan to
one bundle or sell them produce next period?
separately?
How much should we budget for
Should we sell directly to next period’s utility expense?
customers or use a distributor?

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Managerial Accounting Activities: Managerial Accounting Activities:

Supply Chain Management Majors Supply Chain Management Majors
Decisio
Controll
n
ing
Making
Did we spend more or less than Should we transfer production of a
expected for the units we actually component part to an overseas
produced? supplier?

Are we achieving our goal of Should we redesign our

reducing the number of defective manufacturing process to lower
units produced? inventory levels?
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Managerial Accounting Activities:
Human Resource Management Majors
Planni
ng
How much should we plan to
spend for occupational safety
training?
How much should we plan to
spend on employee recruitment
advertising?
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Managerial Accounting Activities:
Human Resource Management Majors
Decisio
n in the U.S. work in non-public
Making
Should we hire an on-site medical
staff to lower our healthcare
costs?
Should we hire temporary workers
or full-time employees?
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Certified Management Accountant
A management accountant
who has the necessary
qualifications
and who passes a rigorous
professional
exam earns the right to be known
as a
Certified Management Accountant
(CMA).
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Managerial Accounting Activities:
Human Resource Management Majors
Controll
ing
Is our employee retention rate
exceeding our goals?
Are we meeting our goal of
completing timely performance
appraisals?
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Accounting Majors
The IMA estimates that more than
80% of professional accountants
accounting environments.
Employers expect accounting majors
to have strong financial accounting
skills, but they also expect
application of the planning,
80% controlling, and decision making
skills that are the foundation of
managerial accounting.
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CMA Exam
Part 1 Financial Planning, Performance, and Control
Planning, budgeting, and forecasting
Performance management
Cost management
Internal controls
Professional ethics
Part 2 Financial Decision Making
Financial statement analysis
Corporate finance
Decision analysis and risk management
Investment decisions
Professional ethics
Information about becoming a CMA and the CMA program can be
accessed
on the IMA’s website at www.imanet.org or by calling 1-800-638-4427.
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Managerial Accounting: Beyond the Managerial Accounting: Beyond the

Numbers Numbers
Plannin Measurement What net income should my company
The primary purpose skills help report to its stockholders?
g
of this course is to managers Measure and report historical data
teach measurement answer that complies with applicable rules.
skills that managers Controll important How will my company serve its customers?
use to support ing questions. Measure and analyze mostly
planning, controlling, non-financial, process-oriented data.
and decision making Decisio
activities. n Will my company need to borrow money?
Making Measure and analyze estimated
future cash flows.

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Managerial Accounting: Beyond the

An Ethics Perspective
Numbers
The Institute of Management Accountant’s (IMA)
Statement of Ethical Professional Practice provides
Six Business Management Perspectives that guidelines for ethical behavior.
go beyond the numbers to enable intelligent
Recognize and communicate professional
planning, control, and decision making: limitations that preclude responsible judgment.
•An Ethics Perspective
•A Strategic Management Perspective
Maintain Follow applicable
•An Enterprise Risk Management Perspective professional
Compete laws, regulations,
•A Corporate Social Responsibility Respective competence. nce and standards.
•A Process Management Prospective
•A Leadership Perspective
Provide accurate, clear, concise, and
timely decision support information.

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IMA Guidelines for Ethical Behavior IMA Guidelines for Ethical Behavior
Do not disclose confidential Mitigate conflicts of
information unless legally interest and advise others
obligated to do so. of potential conflicts.

Refrain from
Do not use
conduct that
confidential
information for
Confidenti would prejudice Integrity
ality carrying out
unethical or illegal
duties ethically.
advantage.
Abstain from activities that
Ensure that subordinates do might discredit the
not disclose confidential profession.
information.
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IMA Guidelines for Ethical Behavior IMA Guidelines for Resolution of an

Communicate information
fairly and objectively.
Credibility
Disclose all relevant
information that could
influence a user’s
understanding of reports
and recommendations.
Ethical Conflict
Follow employer’s established policies.
If this does not work, consider the following:
Disclose delays or
deficiencies in information ▫ Discuss the conflict with immediate supervisor or next
timeliness, processing, or highest uninvolved managerial level.
internal controls. ▫ If immediate supervisor is the CEO, consider the
board of directors or the audit committee.
▫ Contact with levels above the immediate supervisor
should only be initiated with the supervisor’s
knowledge, assuming the supervisor is not involved.

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IMA Guidelines for Resolution of an

Ethical Conflict Why Have Ethical Standards?
Ethical standards in business are essential for a
If following employer’s established policies for conflict smooth functioning economy.
resolution do not work, consider these additional
practices:
▫ Except where legally prescribed, maintain Without ethical standards in business, the
confidentiality.
economy, and all of us who depend on it for
▫ Clarify issues in a confidential discussion with an jobs, goods, and services, would suffer.
objective advisor.
▫ Consult an attorney as to legal obligations.

Abandoning ethical standards in business would

lead to a lower quality of life with less
desirable goods and services at higher prices.

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A Strategic Management Perspective Customer Value Propositions

A strategy Customer
Understand and respond to
is a “game plan” Intimacy
individual customer needs.
that enables a company Strategy
to attract customers
by distinguishing itself Operational
Deliver products and
from competitors. Excellence
services
faster, more conveniently,
Strategy
and at lower prices.
The focal point of a
company’s strategy should Product
be its target customers. Leadership Offer higher quality products.
Strategy
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An Enterprise Risk Management An Enterprise Risk Management

Perspective Perspective
Should I try to avoid the
risk, accept the risk, or
A process used reduce the risk?

by a company to
proactively identify
and manage risk.

Once a company identifies its risks, perhaps the

most common risk management tactic is to reduce
risks by implementing specific controls.

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A Corporate Social Responsibility

Corporate Social Responsibility
Perspective
Corporate social responsibility (CSR) is a concept
whereby organizations consider the needs
of all stakeholders when making decisions.

Environmental
Employee Communitie Stockholder & Human
Customers Suppliers
s s s Rights
Advocates

CSR extends beyond legal compliance

to include voluntary actions that satisfy
stakeholder expectations.

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A Process Management Perspective Lean Production

A business
process is a series of
steps that are followed in
order to
Customer places Create Production Generate component
carry out some task in an order Order requirements
a business.

Product Customer
Goods delivered Production begins Components
R&D Design Manufacturing Marketing Distribution Service
when needed as parts arrive are ordered

Business functions making up the value chain Lean Production is often called Just-In-Time (JIT) production.
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Lean Production Lean Production

Traditional Manufacturing Because lean thinking only allows production in
response to customer orders, the number of units
produced tends to equal the number of units sold.

Produce goods in Store Make Sales from

anticipation of Sales Inventory Finished Goods
Inventory
The lean approach also results in fewer defects,
less wasted effort, and quicker customer response
times than traditional production methods.

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A Leadership Perspective End of Chapter 1

Organizational leaders unite the

behavior of employees around
two common themes—pursuing
strategic goals and making
optimal decisions.
Factors that influence behavior:
•Intrinsic Motivation
•Extrinsic Incentives
•Cognitive Bias