Introduction To Management Accounting

Introduction to Management
Accounting
Chapter 1
1
Copyright © 2007 Prentice-Hall. All rights reserved
Objective 1
Identify managers’ four primary

responsibilities
2
Managers’ Responsibilities
Setting goals and
Planning
objectives
Decision Overseeing day-to-

Making Directing
day operations
Controlling Evaluating results

of operations
3
Objective 2
Distinguish financial accounting

from management accounting
4
Primary Users?
Management Financial
• Internal • External
• Managers • Investors, creditors,
government
regulators
5
Purpose of Information?
• Help managers plan, • Help investors and
direct, and control creditors make
business operations investment and credit
decisions
6
Primary Accounting Product?
• Any internal • General-purpose
accounting report financial statements
deemed worthwhile
by management
7
What must be included?
• Whatever • Determined by GAAP
management needs
as long as benefits of
using report exceeds
cost of preparing it
8
Underlying basis of the
information?
• Focus on future • Based on historical
• Information on transactions
external and internal • External transactions
transactions
9
Information characteristic
emphasized?
• Relevance • Reliable and objective
10
Business unit?
• Segments – products, • Company as a whole
geographical regions,
customers
11
How often prepared?
• Depends on • Annually and
management needs quarterly
12
Verification?
• No independent • Independent audits of
audits publicly traded
• Internal audits may companies
occur
13
Required by outside group?
• No • Yes – SEC for
publicly traded
companies
14
Concern over how reports affect
employee behavior?
• Yes • Concern is about
adequacy of
disclosure
15
E1-10
a. Companies must follow GAAP in their
Financial accounting
____________________ systems.
b. Financial accounting develops reports for
external parties, such as __________
Creditors
Shareholders
and _______________.
c. When managers evaluate the company’s
performance compared to the plan, they
Controlling role of
are performing the __________
management.
16
E1-10
d. __________
Managers are decision makers inside
a company.
e. ___________________
Financial accounting provides
information on a company’s past
performance to external parties.
Management accounting systems are
f. ______________________
not restricted by GAAP but are chosen
by comparing the costs versus the
benefits of the system.
17
E1-10
g. Choosing goals and the means to
Planning function
achieve them is the __________
of management.
h. _____________________
Managerial accounting systems report
on various segments or business units of
the company.
Financial accounting
i. ____________________ statements of
public companies are audited annually by
CPAs.
18
Objective 3
Describe organizational structure and the

roles and skills required of management
accountants within the organization
19
Organizational Structure
Board of
Directors
Audit
Committee
Chief Executive
Officer
Chief Operating Chief Financial

Officer Officer
Vice Presidents
of various Treasurer Controller Internal Audit
operations
20
Management Accountants
• Often part of cross-functional teams
• Report to various vice-presidents of
operations
• Role is to analyze financial impact of
business decisions
• Internal consultants
21
Roles of Management
Accountants
• Ensuring accurate financial records
– Helping to design information systems
– Recording non-routine transactions
– Making adjustments to financial records
• Planning, analyzing, and interpreting
accounting data
• Providing decision support
22
Required Skills
• Knowledge of financial and managerial
accounting
• Analytical skills
• Knowledge of how a business functions
• Ability to work on a team
• Oral and written communications skills
23
E1-11
a. The _____
CFO and the _____COO report to the
CEO.
b. The internal audit function reports to the
CFO or _______ audit committee
CEO and the _____________.
c. The __________
controller is directly responsible for
financial accounting, managerial
accounting, and tax reporting.
Board of Directors
d. The CEO is hired by the _____________.
24
E1-11
e. The __________
treasurer is directly responsible
for raising capital and investing funds.
f. The __________
COO is directly responsible
for the company’s operations.
g. Management accountants often work
cross functional teams
with __________________________.
h. The subgroup of the board of directors is
audit committee
called the _________________.
25
Objective 4
Describe the role of the Institute of

Management Accountants (IMA) and use
its ethical standards to make reasonable
ethical judgments
26
IMA
• Professional association for managerial
accountants
• Goal
– Advance management accounting profession
– Educate society about role of managerial
accountants
• Certifications
– Certified Management Accountant (CMA)
– Certified Financial Managers (CFM)
27
Ethics
• Statement of Ethical Professional Practice
(IMA)
– Maintain professional competence
– Preserve confidentiality of information
– Uphold their integrity
– Perform duties with credibility
– Consult an attorney
28
Steps to Resolve
Ethical Dilemmas
• Follow company’s policies for reporting
unethical behavior
• If not resolved
– Discuss with immediate supervisor
– Discuss with objective advisor
29
E1-13
a. The ______
IMA is the professional
association for management
accountants.
b. The institute offers two types of
certification: The _____
CMA and _____.
CFM
CMA
c. The __________ exam focuses on
managerial accounting topics,
economics, and business finance.
30
E1-13
CFM exam focuses on financial
d. The ______
statement analysis, business valuation,
risk management, working capital policy,
and capital structure.
e. The institute’s monthly publication, called
________________,
Strategic Finance addresses current
topics of interest to managerial
accountants.
31
E1-13
f. The institute says that approximately
85 percent of accountants work inside
_____
of organizations, rather than at CPA
firms.
32
Objective 5
Discuss trends in the business

environment
33
Sarbanes-Oxley Act of 2002
• CEO and CFO - responsible for financial
statements, internal control system,
procedures for financial reporting
• Audit committee – independent and should
include a financial expert
• CPA firms – limited non-audit services for
audit clients and periodic quality review
• Stiffer penalties for white-collar crimes
34
Trends
• Shift toward service economy
• Competing in global marketplace
• Time-based competition
– ERP systems
– E-Commerce
– Just-in-Time Management
• Total Quality Management
35
Trends
• Cost-Benefit Analysis – weighing costs
against benefits to help make decisions
36
E1-16
a. To account for uncertainty in the amounts
of future costs and benefits, we compute
the ______________
expected value by multiplying the
probability of each outcome by the dollar
value of that outcome.
b. To make a cost-benefit decision today, we
present value
must find the ______________ of the
costs and benefits that are incurred in the
future.
37
E1-16
c. The goal of _______
TQM is to meet
customers’ expectations by providing them
with superior products and services by
eliminating defects and waste throughout
the value chain.
38
E1-16
d. Most of the costs of adopting ERP, JIT,
expanding into a foreign market, or
improving quality are incurred in the
present
________, but most of the benefits occur
in the _______.
future
39
E1-16
e. _______________
Throughput time is the time between
buying raw materials and selling the
finished products.
f. __________
ERP serves the information needs
of people in accounting, as well as people
in marketing and in the warehouse.
g. Firms adopt __________
e-commerce to conduct
business on the Internet.
40
E1-16
h. Firms acquire the ______________
ISO9001:2000
certification to demonstrate their
commitment to quality.
41
Objective 6
Use cost-benefit analysis to make

business decisions
42
E1-18
1. What are the total costs of adopting JIT?
Employee training $13,500

Streamline production process 37,000
Supplier identification 8,000
Total costs $58,500
43
E1-18
2. What are the total benefits of adopting
JIT?
Savings in warehouse expenses $97,000

Lower spoilage costs 46,000
Total benefits $143,000
44
E1-18
3. Should Wild Rides adopt JIT? Why or
why not?
Expected total benefits $143,000

Expected total costs (58,500)
Excess of benefits over costs $ 84,500
Wild Rides should adopt JIT because the

expected benefits exceed the costs.
45
S1-8
Expected value of additional benefits:
Outcome Benefits Probability Expected
value
Moderately $20 million  0.85 = $17 million
successful
Extremely $80 million  0.15 = $12 million
successful
$29 million
46
S1-8
Total benefits:
Benefits already realized $170 million
Expected value of
additional benefits 29 million
Total expected benefits $199 million
Total costs $200 million
47
S1-8
The costs of $200 million just exceed the
total expected benefits of $199 million.
Under these circumstances, the quality
program does not appear to have been a
worthwhile investment.
48
End of Chapter 1
49

Introduction To Management Accounting

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Introduction To Management Accounting

Uploaded by

Copyright:

Available Formats

Introduction to Management

Identify managers’ four primary

Decision Overseeing day-to-

Controlling Evaluating results

Distinguish financial accounting

Describe organizational structure and the

Chief Operating Chief Financial

Describe the role of the Institute of

Discuss trends in the business

Use cost-benefit analysis to make

Employee training $13,500

Savings in warehouse expenses $97,000

Expected total benefits $143,000

Wild Rides should adopt JIT because the

Total costs $200 million

You might also like