Prologue-1

LECTURER
MA Le Tra My
Email: mylt@ftu.edu.vn
Phone: 0982230387
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ASSESSMENT
Attendance: 10%

Midterm:
Individual test: 20%: Sep 1st week
Group case study: 10%: Sep 3rd week

Final exam: 60%

 Prologue-3

Managerial Accounting:
An Overview
Prologue
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA

Copyright © 2015 by McGraw-Hill Education. All rights reserved.

 Prologue-4

Financial and Managerial

Accounting: Seven Key Differences
Financial Accounting Managerial Accounting
1. Users External persons who Managers who plan for
make financial decisions and control an organization

2. Time focus Historical perspective Future emphasis

3. Verifiability Emphasis on Emphasis on
versus relevance objectivity and verifiability relevance
4. Precision versus Emphasis on Emphasis on
timeliness precision timeliness
5. Subject Primary focus is on Focus on
companywide reports segment reports

6. Rules Must follow GAAP / IFRS Not bound by GAAP / IFRS

and prescribed formats or any prescribed format
7. Requirement Mandatory for Not
external reports Mandatory
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Work of Management

Planning
Planning
Controlling
Controlling
Decision
Decision
Making
Making
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Planning

Establish
Establish Goals
Goals

Specify
Specify How
How Goals
Goals
Will
Will Be
Be Achieved
Achieved

Develop
Develop Budgets
Budgets
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Controlling
The
The control
control function
function gathers
gathers feedback
feedback to
to
ensure
ensure that
that plans
plans are
are being
being followed.
followed.

Feedback
Feedback inin the
the form
form ofof performance
performance reports
reports
that
that compare
compare actual
actual results
results with
with the
the budget
budget
are
are an
an essential
essential part
part of
of the
the control
control function.
function.
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Decision Making
Decision
Decision making
making involves
involves
making
making a selection among
competing alternatives.

What
What should
should
we
we be
be selling?
selling?
Who
Who should
should
we
we be
be serving?
serving?
How
How should
should
we
we execute?
execute?
 Prologue-9

Managerial Accounting Activities:

Marketing Majors

Planning
Planning

How much should we budget for

TV, print, and internet advertising?

How many salespeople should we

plan to hire to serve a new
territory?
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Managerial Accounting Activities:

Marketing Majors

Controlling
Controlling

Is the budgeted price cut

increasing unit sales as expected?

Are we accumulating too much

inventory during the holiday
shopping season?
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Managerial Accounting Activities:

Marketing Majors

Decision
Decision
Making
Making

Should we sell our services as

one bundle or sell them
separately?

Should we sell directly to

customers or use a distributor?
 Prologue-12

Managerial Accounting Activities:

Supply Chain Management Majors

Planning
Planning

How many units should we plan to

produce next period?

How much should we budget for

next period’s utility expense?
 Prologue-13

Managerial Accounting Activities:

Supply Chain Management Majors

Controlling
Controlling

Did we spend more or less than

expected for the units we actually
produced?

Are we achieving our goal of

reducing the number of defective
units produced?
 Prologue-14

Managerial Accounting Activities:

Supply Chain Management Majors

Decision
Decision
Making
Making

Should we transfer production of a

component part to an overseas
supplier?

Should we redesign our

manufacturing process to lower
inventory levels?
 Prologue-15

Managerial Accounting Activities:

Human Resource Management Majors

Planning
Planning

How much should we plan to

spend for occupational safety
training?

How much should we plan to

spend on employee recruitment
advertising?
 Prologue-16

Managerial Accounting Activities:

Human Resource Management Majors

Controlling
Controlling

Is our employee retention rate

exceeding our goals?

Are we meeting our goal of

completing timely performance
appraisals?
 Prologue-17

Managerial Accounting Activities:

Human Resource Management Majors

Decision
Decision
Making
Making

Should we hire an on-site medical

staff to lower our healthcare
costs?

Should we hire temporary workers

or full-time employees?
 Prologue-18

Accounting Majors
The IMA estimates that more than
80% of professional accountants
in the U.S. work in non-public
accounting environments.

Employers expect accounting majors

to have strong financial accounting
skills, but they also expect
application of the planning,
80% controlling, and decision making
skills that are the foundation of
managerial accounting.
 Prologue-19

Certified Management Accountant

A
A management
management accountant
who has
has the
the necessary
necessary qualifications
qualifications
and
and who
who passes
passes aa rigorous
rigorous professional
professional
exam
exam earns
earns the
the right
right to
to be
be known
known asas aa
Certified Management Accountant
(CMA).
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CMA Exam
Part 1 Financial Planning, Performance, and Control
Planning, budgeting, and forecasting
Performance management
Cost management
Internal controls
Professional ethics

Part 2 Financial Decision Making

Financial statement analysis
Corporate finance
Decision analysis and risk management
Investment decisions
Professional ethics

Information
Information about
about becoming
becoming aa CMA
CMA and
and the
the CMA
CMA program
program can
can be
be accessed
accessed
on
on the
the IMA’s
IMA’s website
website at
at www.imanet.org
www.imanet.org or
or by
by calling
calling 1-800-638-4427.
1-800-638-4427.
 Prologue-21

Managerial Accounting: Beyond the

Numbers

The primary purpose Planning

Planning
of this course is to
teach measurement
skills that managers
Controlling
Controlling
use to support
planning, controlling,
and decision making
Decision
Decision
activities.
Making
Making
 Prologue-22

Managerial Accounting: Beyond the

Numbers
Measurement What
What net
net income
income should
should my
my company
company
skills help report
report to
to its
its stockholders?
stockholders?
managers
Measure
Measure and and report
report historical
historical data
data
answer that
that complies
complies with
with applicable
applicable rules.
rules.
important
questions. How
How will
will my
my company
company serveserve its
its customers?
customers?
Measure
Measure andand analyze
analyze mostly
mostly non-
non-
financial,
financial, process-oriented
process-oriented data.
data.

Will
Will my
my company
company need
need to
to borrow
borrow money?
money?
Measure
Measure and
and analyze
analyze estimated
estimated
future
future cash
cash flows.
flows.
 Prologue-23

Managerial Accounting: Beyond the

Numbers

Six Business Management Perspectives that

go beyond the numbers to enable intelligent
planning, control, and decision making:
• An Ethics Perspective
• A Strategic Management Perspective
• An Enterprise Risk Management Perspective
• A Corporate Social Responsibility Respective
• A Process Management Prospective
• A Leadership Perspective
 Prologue-24

An Ethics Perspective
The Institute of Management Accountant’s (IMA)
Statement of Ethical Professional Practice provides
guidelines for ethical behavior.
Recognize
Recognize and
and communicate
communicate professional
professional
limitations
limitations that
that preclude
preclude responsible
responsible judgment.
judgment.

Maintain
Maintain Follow
Follow applicable
applicable
professional
professional Competence laws,
laws, regulations,
regulations,
competence.
competence. and
and standards.
standards.

Provide
Provide accurate,
accurate, clear,
clear, concise,
concise, and
and
timely
timely decision
decision support
support information.
information.
 Prologue-25

IMA Guidelines for Ethical

Behavior
Do
Do not
not disclose
disclose confidential
confidential
information
information unless
unless legally
legally
obligated
obligated to
to do
do so.
so.

Do
Do not
not use
use
confidential
confidential
information
information forfor Confidentiality
Confidentiality
unethical
unethical or
or illegal
illegal
advantage.
advantage.

Ensure
Ensure that
that subordinates
subordinates do
do
not
not disclose
disclose confidential
confidential
information.
information.
 Prologue-26

IMA Guidelines for Ethical

Behavior
Mitigate
Mitigate conflicts
conflicts of
of
interest
interest and
and advise
advise others
others
of
of potential
potential conflicts.
conflicts.
Refrain
Refrain from
from
conduct
conduct that
that
would
would prejudice
prejudice Integrity
carrying
carrying out
out
duties
duties ethically.
ethically.
Abstain
Abstain from
from activities
activities that
that
might
might discredit
discredit the
the
profession.
profession.
 Prologue-27

IMA Guidelines for Ethical

Behavior
Communicate
Communicate information
information
fairly
fairly and
and objectively.
objectively.

Disclose
Disclose delays
delays or
or
deficiencies
deficiencies inin information
information
Credibility
Credibility timeliness,
timeliness, processing,
processing, or or
internal
internal controls.
controls.

Disclose
Disclose all
all relevant
relevant
information
information that
that could
could
influence
influence aa user’s
user’s
understanding
understanding of of reports
reports
and
and recommendations.
recommendations.
 Prologue-28

IMA Guidelines for Resolution of

an Ethical Conflict

Follow
Follow employer’s
employer’s established
established policies.
policies.
If
If this
this does
does not
not work,
work, consider
consider thethe following:
following:
▫▫ Discuss
Discuss the
the conflict
conflict with
with immediate
immediate supervisor
supervisor or
or next
next
highest
highest uninvolved
uninvolved managerial
managerial level.
level.
▫▫ If
If immediate
immediate supervisor
supervisor is
is the
the CEO,
CEO, consider
consider the
the board
board of
of
directors
directors or
or the
the audit
audit committee.
committee.
▫▫ Contact
Contact with
with levels
levels above
above the
the immediate
immediate supervisor
supervisor
should
should only
only be
be initiated
initiated with
with the
the supervisor’s
supervisor’s knowledge,
knowledge,
assuming
assuming thethe supervisor
supervisor isis not
not involved.
involved.
 Prologue-29

IMA Guidelines for Resolution of

an Ethical Conflict

If
If following
following employer’s
employer’s established
established policies
policies for
for conflict
conflict
resolution
resolution dodo not
not work,
work, consider
consider these
these additional
additional practices:
practices:
▫▫ Except
Except where
where legally
legally prescribed,
prescribed, maintain
maintain confidentiality.
confidentiality.
▫▫ Clarify
Clarify issues
issues in
in aa confidential
confidential discussion
discussion with
with an
an
objective
objective advisor.
advisor.
▫▫ Consult
Consult anan attorney
attorney as as to
to legal
legal obligations.
obligations.
 Prologue-30

Why Have Ethical Standards?

Ethical
Ethical standards
standards in
in business
business are
are essential
essential for
for aa
smooth
smooth functioning
functioning economy.
economy.

Without ethical standards in business, the

economy, and all of us who depend on it for
jobs, goods, and services, would suffer.

Abandoning ethical standards in business would

lead to a lower quality of life with less
desirable goods and services at higher prices.
 Prologue-31

A Strategic Management Perspective

A strategy
is a “game plan”
that enables a company
to attract customers
by distinguishing itself
from competitors.

The
The focal
focal point
point of
of a
company’s
company’s strategy
strategy should
should
be its target customers.
 Prologue-32

Customer Value Propositions

Customer
Understand and respond to
Intimacy
individual customer needs.
Strategy

Operational Deliver products and services

Excellence faster, more conveniently,
Strategy and at lower prices.

Product
Leadership Offer higher quality products.
Strategy
 Prologue-33

An Enterprise Risk Management Perspective

Should I try to avoid the
risk, accept the risk, or
A process used reduce the risk?

by a company to
proactively identify
and manage risk.

Once
Once aa company
company identifies
identifies its
its risks,
risks, perhaps
perhaps the
the
most
most common
common risk
risk management
management tactictactic is
is to
to reduce
reduce
risks by implementing specific
specific controls.
controls.

An Enterprise Risk Management Perspective
Examples of Business Risks
● Intellectual assets stolen from
computer files
● Products harming customers
● Losing market share due to the
unforeseen actions of competitors
● Poor weather conditions shutting
down operations
● Website malfunction
● Financial statements unfairly
reporting the value of inventory
● An employee accessing
unauthorized information
Prologue-34
Examples of Controls to
Reduce Business Risks
● Create firewalls that prohibit com-
puter hackers from corrupting or
stealing intellectual property
● Develop a formal and rigorous
new product testing program
● Develop an approach for legally
gathering information about
competitors' plans and practices
● Develop contingency plans for
overcoming weather-related
disruptions
● Thoroughly test the website
before going "live" on the Internet
● Count the physical inventory on
hand to make sure that it agrees
with the accounting records
● Create password-protected barriers
that prohibit employees from
obtaining information not needed
to do their jobs
 Prologue-35

A Corporate Social Responsibility

Perspective

Corporate social responsibility (CSR) is a concept

whereby organizations consider the needs
of all stakeholders when making decisions.

Environmental
Customers Employees Suppliers Communities Stockholders & Human Rights
Advocates

CSR extends beyond legal compliance

to include voluntary actions that satisfy
stakeholder expectations.
 Prologue-36

Corporate Social Responsibility

Examples of Corporate Social Responsibility
Companies should provide customers with: Companies and their suppliers should provide
● Safe, high quality products that are fairly employees with:
priced ● Safe and humane working conditions
● Competent, courteous, and rapid delivery ● Non-discriminatory treatment and the
of products and services right to organize and file grievances
● Full disclosure of product-related risks ● Fair compensation
● Easy to use information systems for ● Opportunities for training, promotion,
shopping and tracking orders and personal development
Companies should provide suppliers with: Companies should provide communities with:
● Fair contract terms and prompt payments ● Payment of fair taxes
● Reasonable time to prepare orders ● Honest information about plans such as
● Hassle-free acceptance of timely and plant closings
complete deliveries ● Resources that support charities, schools,
● Cooperative rather than unilateral and civic activities
actions ● Reasonable access to media sources
Companies should provide stockholders with: Companies should provide environmental
● Competent management and human rights advocates with:
● Easy access to complete and accurate ● Greenhouse gas emissions data
financial information ● Recycling and resource conservation data
● Full disclosure of enterprise risks ● Child labor transparency
● Honest answers to knowledgeable ● Full disclosure of suppliers located in
questions developing countries
 Prologue-37

A Process Management Perspective

A business
process is a series of
steps that are followed in order to
carry out some task in
a business.

Business Functions Making up the Value Chain

Product Customer
R&D Design Manufacturing Marketing Distribution Service
 Prologue-38

Lean Production

Customer places Create Production Generate component

an order Order requirements

Goods delivered Production begins Components

when needed as parts arrive are ordered

Lean Production is often called Just-In-Time (JIT) production.

 Prologue-39

Lean Production
Traditional Manufacturing

Produce goods in Store Make Sales from

anticipation of Sales Inventory Finished Goods
Inventory

Traditional manufacturing methods organize work

departmentally and encourage those departments to
maximize their output even it exceeds customer demand and
bloats inventories.
 Prologue-40

Lean Production
Because lean thinking only allows production in
response to customer orders, the number of units
produced tends to equal the number of units sold.

The lean approach also results in fewer defects,

less wasted effort, and quicker customer response
times than traditional production methods.
 Prologue-41

A Leadership Perspective

Organizational leaders unite the

behavior of employees around two
common themes—pursuing
strategic goals and making optimal
decisions.
Factors that influence behavior:
• Intrinsic Motivation
• Extrinsic Incentives
• Cognitive Bias
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End of Prologue