14 Managerial Accounting

Learning Objectives
Identify the features of managerial accounting and the
1 functions of management.

Identify the three broad functions of management and the role

2 of management accountants in an organizational structure.

3 Explain the importance of business ethics.

4 Discuss trends in managerial accounting.

1
Comparing Financial & Managerial Accounting. -
Managerial Accounting focuses on needs of i________
u____

2 LO 1
 3 Broad Management Functions

Planning Directing Controlling

 Maximize short-term  Coordinate diverse  Keeping activities on

profit and market activities and human track.
share. resources.  Determine whether
 Commit to  Implement planned goals are met.
environmental objectives.  Decide changes
protection and social  Provide incentives to needed to get back
programs. motivate employees on track.
 Add value to the  Hire and train  May use an informal
business. employees. or formal system of
 Produce a smooth- evaluations.
running operation.

3 LO 1
Good decision-making is the outcome of
good judgment in
planning, directing, & controlling
 Organizational Structure

Organization charts show

the interrelationships of
activities and the delegation
of authority and
responsibility within the
company.

5 LO 1
 Business Ethics
Facts:
• Business scandals cause massive investment
losses and employee layoffs
• Corporate fraud has increased 13% in last five
years
• Employee fraud makes up 60% of all fraud,
expense account abuse, theft of assets, etc.
• Intentional misstatement of financial reports, or
financial reporting fraud, is the most costly to
companies
 Business Ethics

 Many organizations have codes of business ethics.

 Huge corporate financial frauds have occurred.

CREATING PROPER INCENTIVES

 Systems and controls sometimes create incentives
for managers to take unethical actions.
 Controls need to be effective and realistic.

8 LO 4
Managerial Accounting Trends & Practices
Value Chain

Refers to all activities associated with providing a

product or service
- For a manufacturing firm, these include:

A manufacturer’s value chain

 Focus on the Value Chain

Just-In-Time (JIT) Inventory Methods

 Inventory system in which goods are manufactured or
purchased just in time for sale.

Total Quality Management (TQM)

 Reduce defects in finished products, with the goal of
zero defects.

15-10 LO 4
 Focus on the Value Chain

Theory of Constraints
 Constraints (“bottlenecks” ) limit the company’s
potential profitability.
 A specific approach to identify and manage these
constraints in order to achieve company goals.

Enterprise Resource Planning (ERP)

 Software programs designed to manage all major
business processes.

11 LO 4
 Managerial Accounting Trends & Practices

Lean manufacturing
• Today, manyproducts require little direct labour to
complete, due in large part to advancements in
automation.
• Customers dictate requirements to suppliers and
often look for smaller quantities of individualized
products.
• Producers need to identify and focus on value.
 Balanced Scorecard

 Evaluates operations in an integrated fashion using

both financial and n______ - f_____________
measures.
 Links performance to overall company objectives.

13 LO 4
 Corporate Social Responsibility

 Considers a company’s efforts to employ sustainable

business practices with regard to its employees,
society, and the environment.
 Is sometimes referred to as the triple bottom line
because it evaluates a company’s performance with
regard to people, planet, and profit.
 Recent reports indicate that over 50% of the 500
largest U.S. companies provide sustainability reports.

14 LO 4