Chapter 1 g g The Changing Role of  Managerial Accounting in a  Dynamic Business  Environment

ACG 6309 Dr. Chula King

Student Learning Outcomes • Define managerial accounting and describe its role in the management process. • Explain four fundamental management processes that help organizations attain  their goals. • List and describe five objectives of managerial accounting activity. • Explain the major differences between managerial and financial accounting. • Explain where managerial accountants are located in an organization, in terms of  formal organization, deployment in cross‐functional teams, and physical location. • Describe the roles of an organization's chief financial officer (CFO) or controller,  treasurer, and internal auditor. • Briefly describe some of the major contemporary themes in managerial accounting. • Understand and explain the concepts of strategic cost management and the value  chain. • Understand the ethical responsibilities of a managerial accountant. • Discuss the professional organizations, certification process, and ethical standards  in the field of managerial accounting.

Managerial Accounting • Managerial Accounting is the process of – Identifying – Measuring – Analyzing – Interpreting – Communicating information

Managing Resources, Activities, and  People An organization . . .

Acquires Resources

Decision Making

Directing

Organized set of activities

Controlling

Planning

Hires People

How Managerial Accounting Adds  Value to the Organization • Providing information for decision making and  planning. • Assisting managers in directing and controlling  activities. • Motivating managers and other employees  towards organization’s goals. • Measuring performance of activities, managers,  and other employees. • Assessing the organization’s competitive  position.

Managerial versus Financial Accounting Managerial Accounting Users of Information Managers, within the organization. Regulation Not required and unregulated, since it is intended only for management.

Financial Accounting Interested parties, outside the organization. Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. Commission Source of Data The organization's basic accounting system, plus Almost exclusively drawn from the organization's various other sources, such as rates of effective basic accounting system, which accumulates financial information. products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays Nature of Reports and Reports often focus on subunits within the Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction Procedures organization, such as departments, divisions, geographical regions, or product lines. Based on data. a combination of historical data, estimates, and projections of future events.

Line and Staff Positions A line position is directly involved in achieving the basic objectives of an organization.

A staff position supports and assists line positions. Example: A cost accountant in the manufacturing plant.

Example: A production supervisor in a manufacturing plant.

© Dr. Chula King All Rights Reserved

Controller • The chief managerial and financial accountant  who has responsibility for – Supervising accounting personnel – Preparing information and reports, both  Preparing information and reports both managerial and financial – Analyzing accounting information – Planning and decision making

Treasurer • Responsible for raising capital and  safeguarding the organization’s assets – Supervises relationships with financial institutions – Works with current and potential investors Works with current and potential investors – Manages investments – Establishes credit policies – Manages insurance coverage

Internal Auditor • Responsible for reviewing accounting  procedures, records, and reports in both the  controller’s and the treasurer’s area of  responsibility – Expresses an opinion to the top management  regarding the effectiveness of the organization’s  accounting system.

Major Themes in Managerial Accounting Behavioral Issues

Costs and Benefits

Decision Making

Evolution and Adaptation

Managerial Accounting

Cost Management Systems • Objectives – Measure the cost of resources consumed. – Identify and eliminate non‐value‐added costs. – Determine efficiency and effectiveness of major  Determine efficiency and effectiveness of major activities. Cost Management – Identify and evaluate new activities that can  System improve performance.

Strategic Cost Management and the  Value Chain Product Design Production Research and Development

Marketing

Securing raw materials and other resources

Distribution Customer Service

Value Chain

Ethical Climate of Business • The corporate scandals experienced over the  last few years have shown us that unethical  behavior in business is wrong in a moral sense  and can be disastrous in the economy.   In  and can be disastrous in the economy In addition to Sarbanes‐Oxley, there will likely be  more reforms in corporate governance and  accounting.

Managerial Accounting as a Career Professional Organizations Institute of Management Accountants (IMA)

Publishes Management Accounting and research studies.

Administers Certified Management Accountant program

Develops Standards of Ethical Conduct for Management Accountants

Professional Ethics • Competence • Confidentiality • Integrity • Credibility

Concluding Comments • Define managerial accounting and describe its role in the management process. • Explain four fundamental management processes that help organizations attain  their goals. • List and describe five objectives of managerial accounting activity. • Explain the major differences between managerial and financial accounting. • Explain where managerial accountants are located in an organization, in terms of  formal organization, deployment in cross‐functional teams, and physical location. • Describe the roles of an organization's chief financial officer (CFO) or controller,  treasurer, and internal auditor. • Briefly describe some of the major contemporary themes in managerial accounting. • Understand and explain the concepts of strategic cost management and the value  chain. • Understand the ethical responsibilities of a managerial accountant. • Discuss the professional organizations, certification process, and ethical standards  in the field of managerial accounting.