Introduction To Managerial Accounting

Introduction to Managerial
Accounting
Chapter 1
1-1
Copyright ©2008 Prentice Hall. All rights reserved
Objective 1
Identify managers’ four primary

responsibilities
1-2
Managers’ Responsibilities
Setting goals and
Planning
objectives
Decision Overseeing day-to-

Making Directing day operations
Controlling Evaluating results

of operations
1-3
Objective 2
Distinguish financial accounting

from managerial accounting
1-4
Managerial vs Financial Accounting
Issue Managerial Financial
Primary Users Internal External
Purpose of Plan, Direct, Users make

Information Control, Decide investing and
lending
decisions
1-5
Primary Internal Reports General

Accounting useful to Purpose
Product Management Financial
Statements
What is Defined by Determined by
included? Management GAAP
1-6
Underlying Internal and Based on

Basis of External historical
Information Transactions, transactions
focus on future with external
parties
Emphasis Data must be Data must be
relevant reliable and
objective
1-7

Business Unit Segments of Company as a
the business whole
Preparation Depends on Annually and
management Quarterly
needs
Verification Internal audit External audit
1-8

Information No requirement SEC requires
Requirements publicly traded
companies to
issue audited
financial
statements
Impact on Careful Adequacy of
employee consideration disclosure
behavior
1-9
E1-10 What type of
users outside of
the company
a. Companies must follow GAAP in their might utilize
financial
financial accounting
____________________ systems. information?
b. Financial accounting develops reports for

external parties, such as __________
and _______________.
c. When managers evaluate the company’s
performance compared to the plan, they
controlling role of
are performing the __________
Management.
1-10
E1-10
d. __________
Managers are decision makers inside
a company.
e. ___________________
Financial accounting provides
information on a company’s past
performance to external parties.
Managerial accounting
f. ______________________ systems are
not restricted by GAAP but are chosen
by comparing the costs versus the
benefits of the system.
1-11
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.
1-12
Objective 3
Describe organizational structure and the

roles and skills required of management
accountants within the organization
1-13
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
1-14
Changing 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
1-15
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
1-16
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______________.
1-17
E1-11
e. The __________
treasurer is directly responsible
for raising capital and investing funds.
Management
accountants
f. The __________
COO is directly responsible
have many skills
and need to be
for the company’s operations. able to work with
all areas in the
g. Managerial accountants often workcompany. with
__________________________.
h. The subgroup of the board of directors is
called the audit committee
_________________.
1-18
Objective 4
Describe the role of the Institute of

Management Accountants (IMA) and use
its ethical standards to make reasonable
ethical judgments
1-19
IMA
• Professional association for management
accountants
• Goal
 Advance Managerial accounting profession through
• Certification
• Practice Development
• Education
• Networking
• Certifications
 Certified Management Accountant (CMA)
 Certified Financial Managers (CFM)
1-20
Summary of Ethical Standards
Management Accountants must comply with Four Ethical Standards
Preserve
Maintain Professional CONFIDENTIALILTY
COMPETENCE of Information
Uphold INTEGRITY Perform Duties with

CREDIBILITY
1-21
Steps to Resolve
Ethical Dilemmas
• Follow company’s policies for reporting
unethical behavior
• If not resolved
 Discuss with immediate supervisor
 Discuss with objective advisor/IMA Ethics
counselor
 Consult an attorney
1-22
E1-13
a. The ______
IMA is the professional
association for management
accountants.
b. The institute offers two types of
CMA and CFM
certification – the _____ _____.
CMA
c. The __________ exam focuses on
managerial accounting topics,
economics, and business finance.
1-23
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 management
accountants.
1-24
E1-13
f. The institute says that approximately
85 percent of accountants work inside
_____
of organizations, rather than at CPA
firms.
1-25
Objective 5
Discuss trends in the business

environment
1-26
CEO and CFO -
responsible for financial Audit committee –
statements, internal independent and
control system, should include a
procedures for financial financial expert
reporting
Sarbanes-Oxley Act of 2002
CPA firms – limited

non-audit services for Stiffer penalties for
audit clients and white-collar crimes
periodic quality
review 1-27
Current Trends
• Shifting economy
• Competing in global marketplace
• Time-based competition
 Advanced Information Systems
 E-Commerce
 Just-in-Time Management
• Total Quality Management
• ISO Certification
• Cost Benefit Analysis
1-28
Objective 6
Use cost-benefit analysis to make

business decisions
1-29
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
1-30
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
1-31
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.
1-32
TRANSACTION
1-33
What is
Transaction?
1-34
How to Notes Transactions?
• Journal
 General Journal
 Specific Journal
- Purchasing Journal
- Selling Journal
- Cash in Journal
- Cash out Journal
- Memorial
1-35
• General Ledger
 T-Form
 Two-Column
 Three- Column
 Four Column
1-36
• Trial Balance
• Adjustment
• Trial Balance after adjustment
• Balance Sheet
1-37
• Income Statement
a. Profit and Loss statement
b. Capital statement
c. Balance sheet
• Closing entry
• Reversing Entry
1-38
The End this Section
1-39

Introduction To Managerial Accounting

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Introduction to Managerial

Identify managers’ four primary

Decision Overseeing day-to-

Controlling Evaluating results

Distinguish financial accounting

Issue Managerial Financial

Primary Users Internal External

Purpose of Plan, Direct, Users make

Issue Managerial Financial

Primary Internal Reports General

Issue Managerial Financial

Underlying Internal and Based on

Issue Managerial Financial

Issue Managerial Financial

b. Financial accounting develops reports for

Describe organizational structure and the

Chief Operating Chief Financial

Describe the role of the Institute of

Uphold INTEGRITY Perform Duties with

Discuss trends in the business

Sarbanes-Oxley Act of 2002

CPA firms – limited

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

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