Chapter 1

The Changing Role of Managerial Accounting in a Dynamic Business Environment

McGraw-Hill/Irwin

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Define Managerial Accounting Managerial accounting is the process of  Identifying  Measuring  Analyzing  Interpreting  Communicating information 1-2 .

. and People An organization . Directing Acquires Resources Organized set of activities Decision Making Controlling Planning Hires People 1-3 . . Activities.Managing Resources.

1-4 . ‡ Assessing the organization¶s competitive position.How Managerial Accounting Adds Value to the Organization ‡ Providing information for decision making and planning. managers. ‡ Measuring performance of activities. and other employees. ‡ Assisting managers in directing and controlling activities. ‡ Motivating managers and other employees towards organization¶s goals.

such as rates of effective basic accounting system. material and labor used in production. occupancy rates in hotels and hospitals. within the organization. Nature of Reports and Reports often focus on subunits within the Reports focus on the enterprise in its entirety. to a lesser degree. since it is intended only for management. . Based almost exclusively on historical transaction geographical regions. the Securities and Exchange Commission. Regulation Not required and unregulated. and. Required and must conform to generally accepted accounting principles. and projections of future events. divisions. combination of historical data. physical quantities of financial information. which accumulates products manufactured. and average take-off delays in airlines.Managerial versus Financial Accounting Financial Accounting Interested parties. such as departments. Based on a data. estimates. 1-5 Managerial Accounting Users of Information Managers. Procedures organization. plus Almost exclusively drawn from the organization's various other sources. Source of Data The organization's basic accounting system. or product lines. Regulated by the Financial Accounting Standards Board. outside the organization.

Line and Staff Positions ‡ A line position is directly involved in achieving the basic objectives of an organization. ± Example: A production supervisor in a manufacturing plant. 1-6 . ‡ A staff position supports and assists line positions. ± Example: A cost accountant in the manufacturing plant.

Controller The chief managerial and financial accountant responsibility for: ± Supervising accounting personnel ± Preparation of information and reports. managerial and financial ± Analysis of accounting information ± Planning and decision making 1-7 .

± Establishes credit policies.Treasurer Responsible for raising capital and safeguarding the organization¶s assets. ± Manages insurance coverage 1-8 . ± Manages investments. ± Work with investors and potential investors. ± Supervises relationships with financial institutions.

and reports in both the controller¶s and the treasurer¶s area of responsibility. ± Expresses an opinion to top management regarding the effectiveness of the organizations accounting system. records.Internal Auditor Responsible for reviewing accounting procedures. 1-9 .

Major Themes in Managerial Accounting Behavioral Issues Costs and Benefits Information and Incentives Evolution and Adaptation Managerial Accounting 1-10 .

Identify and eliminate nonvalue-added costs. Identify and evaluate new activities that can improve performance.Cost Management Systems Objectives Measure the cost of resources consumed. Cost Management System 1-11 . Determine efficiency and effectiveness of major activities.

Strategic Cost Management and the Value Chain Product Design Production Research and Development Securing raw materials and other resources Marketing Distribution Customer Service 1-12 Start .

there will likely be more reforms in corporate governance and accounting.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. 1-13 . In addition to Sarbanes-Oxley.

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 1-14 .

Professional Ethics Competence Confidentiality Integrity Credibility 1-15 .

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