Introduction to Managerial Accounting Chapter 1 1 1

Objective 1 Identify managers’ four primary responsibilities 1 -2 Copyright © 2008 Prentice Hall.

Managers’ Responsibilities Decision Making Planning Setting goals and objectives Directing Overseeing day-today operations Controlling

Objective 2 Distinguish financial accounting from managerial accounting 1 -4 Copyright © 2008 Prentice

Managerial vs Financial Accounting Issue Managerial Financial Primary Users Internal External Purpose of Information

Managerial vs Financial Accounting Issue Primary Accounting Product What is included? Managerial Financial Internal

Managerial vs Financial Accounting Issue Managerial Underlying Basis of Information Internal and External Transactions,

Managerial vs Financial Accounting Issue Managerial Financial Business Unit Segments of the business Company

Managerial vs Financial Accounting Issue Information Requirements Impact on employee behavior Managerial Financial No

E 1 -10 What type of users outside of the company might utilize financial

E 1 -10 Managers are decision makers inside d. _____ a company. e. __________

E 1 -10 g. Choosing goals and the means to planning function achieve them

Objective 3 Describe organizational structure and the roles and skills required of management accountants

Organizational Structure Board of Directors Audit Committee Chief Executive Officer Chief Operating Officer Vice

Changing Roles of Management Accountants • Ensuring accurate financial records § Helping to design

Required Skills • Knowledge of financial and managerial accounting • Analytical skills • Knowledge

E 1 -11 a. The _____ CFO and the _____ COO report to the

E 1 -11 e. The _____ treasurer is directly responsible Management for raising capital

Objective 4 Describe the role of the Institute of Management Accountants (IMA) and use

IMA • Professional association for management accountants • Goal § Advance Managerial accounting profession

Summary of Ethical Standards Management Accountants must comply with Four Ethical Standards Maintain Professional

Steps to Resolve Ethical Dilemmas • Follow company’s policies for reporting unethical behavior •

E 1 -13 a. The ______ IMA is the professional association for management accountants.

E 1 -13 CFM exam focuses on financial d. The ______ statement analysis, business

E 1 -13 f. The institute says that approximately 85 percent of accountants work

Objective 5 Discuss trends in the business environment 1 -26 Copyright © 2008 Prentice

CEO and CFO responsible for financial statements, internal control system, procedures for financial reporting

Current Trends • Shifting economy • Competing in global marketplace • Time-based competition §

Objective 6 Use cost-benefit analysis to make business decisions 1 -29 Copyright © 2008

E 1 -18 1. What are the total costs of adopting JIT? Employee training

E 1 -18 2. What are the total benefits of adopting JIT? Savings in

E 1 -18 3. Should Wild Rides adopt JIT? Why or why not? Expected

End of Chapter 1 1 -33 Copyright © 2008 Prentice Hall. All rights reserved

Slides: 33

Download presentation

Managers’ Responsibilities Decision Making Planning Setting goals and objectives Directing Overseeing day-today operations Controlling Evaluating results of operations 1 -3 Copyright © 2008 Prentice Hall. All rights reserved

Managerial vs Financial Accounting Issue Managerial Financial Primary Users Internal External Purpose of Information Plan, Direct, Users make Control, Decide investing and lending decisions 1 -5 Copyright © 2008 Prentice Hall. All rights reserved

Managerial vs Financial Accounting Issue Primary Accounting Product What is included? Managerial Financial Internal Reports General useful to Purpose Management Financial Statements Defined by Determined by Management GAAP 1 -6 Copyright © 2008 Prentice Hall. All rights reserved

Managerial vs Financial Accounting Issue Managerial Underlying Basis of Information Internal and External Transactions, focus on future Emphasis Data must be relevant Financial Based on historical transactions with external parties Data must be reliable and objective 1 -7 Copyright © 2008 Prentice Hall. All rights reserved

Managerial vs Financial Accounting Issue Managerial Financial Business Unit Segments of the business Company as a whole Preparation Depends on management needs Internal audit Annually and Quarterly Verification External audit 1 -8 Copyright © 2008 Prentice Hall. All rights reserved

Managerial vs Financial Accounting Issue Information Requirements Impact on employee behavior Managerial Financial No requirement SEC requires publicly traded companies to issue audited financial statements Careful Adequacy of consideration disclosure 1 -9 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -10 What type of users outside of the company might utilize financial information? a. Companies must follow GAAP in their financial accounting __________ systems. 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 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -10 Managers are decision makers inside d. _____ 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 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -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 Copyright © 2008 Prentice Hall. All rights reserved

Organizational Structure Board of Directors Audit Committee Chief Executive Officer Chief Operating Officer Vice Presidents of various operations Chief Financial Officer Treasurer Controller Internal Audit 1 -14 Copyright © 2008 Prentice Hall. All rights reserved

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 Copyright © 2008 Prentice Hall. All rights reserved

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 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -11 a. The _____ CFO and the _____ COO report to the CEO. b. The internal audit function reports to the audit committee CFO or _______ CEO and the _______. c. The _____ is directly responsible for controller financial accounting, managerial accounting, and tax reporting. Board of Directors d. The CEO is hired by the_______. 1 -17 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -11 e. The _____ treasurer is directly responsible Management for raising capital and investing funds. accountants have many skills f. The _____ is directly responsible COO 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 audit committee called the _________. 1 -18 Copyright © 2008 Prentice Hall. All rights reserved

Objective 4 Describe the role of the Institute of Management Accountants (IMA) and use its ethical standards to make reasonable ethical judgments 1 -19 Copyright © 2008 Prentice Hall. All rights reserved

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 Copyright © 2008 Prentice Hall. All rights reserved

Summary of Ethical Standards Management Accountants must comply with Four Ethical Standards Maintain Professional COMPETENCE Uphold INTEGRITY Preserve CONFIDENTIALILTY of Information Perform Duties with CREDIBILITY 1 -21 Copyright © 2008 Prentice Hall. All rights reserved

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 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -13 a. The ______ IMA is the professional association for management accountants. b. The institute offers two types of certification – the _____ and _____. CMA focuses CFM c. The _____ exam on CMAaccounting topics, managerial economics, and business finance. 1 -23 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -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 ________, addresses current Strategic Finance topics of interest to management accountants. 1 -24 Copyright © 2008 Prentice Hall. All rights reserved

CEO and CFO responsible for financial statements, internal control system, procedures for financial reporting Audit committee – independent and should include a financial expert Sarbanes-Oxley Act of 2002 CPA firms – limited non-audit services for audit clients and periodic quality review Stiffer penalties for white-collar crimes Copyright © 2008 Prentice Hall. All rights reserved 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 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -18 1. What are the total costs of adopting JIT? Employee training Streamline production process Supplier identification Total costs $13, 500 37, 000 8, 000 $58, 500 1 -30 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -18 2. What are the total benefits of adopting JIT? Savings in warehouse expenses Lower spoilage costs Total benefits $97, 000 46, 000 $143, 000 1 -31 Copyright © 2008 Prentice Hall. All rights reserved

E 1 -18 3. Should Wild Rides adopt JIT? Why or why not? Expected total benefits Expected total costs Excess of benefits over costs $143, 000 (58, 500) $ 84, 500 Wild Rides should adopt JIT because the expected benefits exceed the costs. 1 -32 Copyright © 2008 Prentice Hall. All rights reserved