Академический Документы
Профессиональный Документы
Культура Документы
Describe how cost accounting supports management accounting and financial accounting
Understand how management accountants affect strategic decisions
Distinguish between the planning and control decisions of managers
4.
5.
6.
7.
8.
9.
CHAPTER OVERVIEW
Chapter 1 is an important foundation chapter. The theme of the text, Cost Accounting: A Managerial
Emphasis, 11/E, is the major role that accounting plays in management decision making. Accounting provides
information managers need when making decisions. Financial accounting provides information to external
managers while modern cost accounting yields insights into what managers and accountants do within an
organization. Management accountants provide financial and nonfinancial information to help managers
decide how best to deal with challenges and opportunities.
Management accounting is successful when it provides information that improves managers strategic,
planning, and control decisions. The use of accounting in the planning and control process is introduced and
highlighted in the text example.
A framework for understanding management accounting systems in providing managers information is
developed in the chapter. The goals, roles, activities, and guidelines of management accounting systems are
described through understanding what managers do.
An introduction and discussion of professional ethics including standards of ethical conduct for management
accountants is presented.
CHAPTER OUTLINE
Learning Objective 1:
Describe how cost accounting supports management accounting and financial accounting
I.
Accounting systems: processing information from economic events into useful information for managers
and others
A. Purpose of cost accounting: to provide information
1. Identifying and measuring financial and other information related to the acquisition or consumption
of an organizations resources
2. Providing users of economic information (managers) useful reports and access to needed
information
B. Cost accounting: provides information relating to cost of acquiring and utilizing resources for both
management and financial accounting
1. Management accounting: focus on internal reporting for decision making of managers in
fulfilling organizations goals
a. Emphasis on the organizationthe future and influencing behavior of managers and
employees
b. Concern with development and implementation of strategies and policies
2. Financial accounting: focus on external reporting for decision making of those outside the
organization
a. Emphasis on financial statements
b. Strict adherence to GAAP
3. Cost management
a. Approaches and activities of managers in planning and control
b. Integral part of general management strategies and their implementation
Do multiple choice 1.
Learning Objective 2:
Understand how management accountants affect strategic decisions
II.
Strategic decisions and management accounting: key to a companys success in creating value for
customers while differentiating itself from its competitors
A. Providing information about the sources of competitive advantage
The Accountants Role in the Organization
1. Strategy: how an organization uses what it has to get what it wants within the marketplace
2. Two broad strategies used
a. Providing a quality product or service at a lower price than competitors
b. Providing a unique product or service at a higher price than competitors
3. Role of management accountant: provide managers information in helping formulate strategy
B. Identifying and building resources and capabilities
1. Strategic analysis: matching knowledge of marketplace opportunities and threats with companys
resources and capabilities
2. Balance sheet information about assets
a. Current resources
i.
Cash adequacy
ii.
Inventory management
b. Long-term productive assets: important strategic decisions for the right investments
i.
ii.
iii.
Identify financial and nonfinancial costs and benefits associated with alternative choices
c. Intangible assets
Do multiple choice 2.
Learning Objective 3:
Distinguish between the planning and control decisions of managers
III. Management accountants role in implementing strategy [Exhibits 1 and 2]
A. Implementing strategy: managers taking action by using planning and control systems to help the
collective decisions of an organization
1. Planning
a. Thinking process
i.
Learning Objective 4:
Distinguish among the problem-solving, scorekeeping, and attention-directing roles of management accountants
B. Supporting managers by providing information to improve strategic, planning, and control decisions
1. Three roles of management accountants for success
a. Problem solving: comparative analysis for decision making
b. Scorekeeping: accumulating data and reporting reliable results
c. Attention directing: helping managers properly focus their attention
2. Goals to assist managers in making better decisions [Survey of Company Practice]
a. Different decisions emphasize roles differently
i.
Chapter 1
Learning Objective 5:
Identify four themes managers need to consider for attaining success
C. Enhancing the value of management accounting systems by guiding managers to focus on challenges
[Concepts in Action]
1. Customer focus [Exhibit 1-3]
Learning Objective 6:
Describe the set of business functions in the value chain
2. Value-chain and supply-chain analysis [Exhibits 1-4 and 1-5]
a. Companies add value through
i.
ii.
iii.
Production
iv.
Marketing
v.
Distribution
vi.
Customer service
Learning Objective 7:
Describe three ways management accountants support managers
D. Providing the most value through three key management accounting guidelines
1. Employ cost-benefit approach
2. Recognize behavioral and technical considerations
3. Identify different costs for different purposes
Do multiple choice 8.
Learning Objective 8:
Understand how management accounting fits into an organizations structure
E. Working within the organization
1. Line and staff relationships [Exhibit 1-6]
2. The chief financial officer and the controller
Do multiple choice 9.
Learning Objective 9:
Understand what professional ethics mean to management accountants
IV. Professional ethics
A.
Guidelines
1. IMA certification programs
2. IMA Standards of Ethical Conduct for Management Accountants [Exhibit 1-7]
a. Competence
b. Confidentiality
c.
Integrity
d.
Objectivity
B.
Chapter 1
2. c 3. d 4. c 5. a 6. b 7. d 8. d 9. c 10. a
CHAPTER QUIZ
1. Why do most companies adhere to GAAP for their basic internal financial statements?
a.
b.
c.
d.
c. financial statement.
d. budget.
d.
Four themes are common to many managers. The critical theme for all of these is
developing relationships with suppliers.
benchmarking and continuous improvement.
reducing costs and improving efficiencies.
improving customer focus and customer satisfaction.
9. ________ management exists to provide advice and assistance to those responsible for attaining the
objectives of the organization.
a.
b.
c.
d.
Line
Functional
Staff
Risk
10. Which of the following is not one of the ethical responsibilities of a management accountant?
a.
b.
c.
d.
Compliance
Confidentiality
Integrity
Objectivity
Chapter 1
WRITING/DISCUSSION EXERCISES
1.
Describe how cost accounting supports management accounting and financial accounting
What are some basic characteristics of accounting that all accountants use whether in
financial or managerial accounting? The Financial Accounting Standards Board (FASB) describes
a hierarchy of accounting qualities in its second Statement of Financial Accounting Concepts. The
characteristics deemed important for financial accounting are the same as those described throughout the
text as those of managerial accounting. The Concepts describe the users of accounting information as
decision makers with the constraints of cost/benefit and materiality. The qualities of accounting
information are given as understandability, decision usefulness, relevance, and reliability. Relevance is
further described by the terms predictive value, feedback value, and timeliness. Reliability is
characterized by verifiability, neutrality, and representational faithfulness. The additional quality of
comparability, including consistency, belongs to the descriptors of decision usefulness. These qualities
apply to all accounting information, financial or managerial, in processing any economic transaction that
have occurred into information useful for making decisions.
The definition given for accounting by the 1941 Committee on Terminology of the American Institute of
Accountants is . . . the art of recording, classifying, and summarizing in a significant manner and in terms
of money, transactions, and events which are in part, at least, of a financial character, and interpreting the
results thereof. This definition was before the study of cost accounting as an academic subject, but note
the statement from the current text about accounting systemsProcessing any economic transactions
entails collecting, categorizing, summarizing, and analyzing. Some basic characteristics define
accounting.
From FASB Statement of Financial Accounting Concepts No. 2 (Stamford, CT: FASB, 1980)
2.
Explain how routine reports to managers not only provide information but also influence
behavior regarding the planning and controlling of operations. Throughout the text, the
behavior or performance of people is noted in response to goals set, structure of bonus calculations, choice
of financial reporting (absorption versus variable costing and the build up of inventory), designation as cost
center versus profit or investment center, etc. The information provided will be acted upon based upon the
users understanding and individual goals. Goal congruence as a concept is introduced at a later point but
has pertinence here. People will work to achieve their own goals within the companys structure. They will
look to the measurement being used to further their own goals. Managers must be careful in designing
measures of performance to insure the measures work to attain the companys strategic goals.
3.
Describe the steps in a decision-making or thinking process. Exhibit 1-1 can be used as an
example. Students may be given a situation or asked to use a recent decision they have made. Any goalsetting situation can be an example. Perhaps the student selects the goal of making good grades for the
semester to gain a good student discount for car insurance purposes. Knowing what is expected for the
discount and for earning specific grades in each class assists in predicting results under various alternative
ways of achieving the goal. Keeping a log of how time was spent would measure action taken. Comparing
the log of how the time was spent to the planned usage of time comprises control. Evaluating the results of
time spent and grades earned are an example of feedback.
4.
management accountants
List some activities a management accountant could do to keep up to date with or ahead
of changes in the field of management. Active membership in professional organizations is one
way to keep current. One of the points made in the IMA Standards of Ethical Conduct for Management
Accountants is to maintain an appropriate level of professional competence by ongoing development of
their knowledge and skills. (Competence section) Keeping up on the news by reading current periodicals,
listening to programs on current business practices, or attending seminars sponsored by professional
organizations are all helpful.
6.
Describe how managers in all areas of the value chain are customers of accounting
information. Include a definition of value as it applies to the value chain along with
the meaning of success for management accounting. The section in the text describing the
value chain notes that usefulness added to the products or services of a company result in value to the
customer. Throughout the section, Enhancing the Value of Management Accounting Systems, runs the
theme of integration of functions and information for improved decision making by managers, a definition
of success for management accounting. This is a focus of modern cost accountingdecision support.
7.
Explain the cost-benefit approach guideline (a) when considered within the confines of
an individual company and (b) when considered as interplay between society and the
individual company. The explanation given in the section of the text Cost-Benefit Approach is useful
for using within the company situation. The interplay between society and company can have a different
meaning of cost-benefit: the company must bear the cost of additional processing or information for the
benefit of society to have a cleaner environment, for example, or to make better decisions about investing or
lending, a typical financial accounting function.
Explain why bean counters would have behavioral considerations as a key
guideline in performing their management accounting functions. As pointed out in the
Behavioral Consideration section in the text, management control is primarily a human activity that
should focus on how to help individuals do their jobs better. The role that management accounting
systems play in helping managers make better decisions demands that accountants understand the
importance of people in each step of the decision-making process and operations of the company.
8.
10
Chapter 1
11
SUGGESTED READINGS
Bhide, A. & Stevenson, H., Why Be Honest if Honesty Doesnt Pay? Harvard Business Review
(September-October 1990) p.121 [9p].
Brooks, L., Business and Professional Ethics for Accountants (2000) South-Western College Publishing,
Cincinnati OH.
Cisco, S. & Strong, K., The Value Added Information Chain, Information Management Journal
(January 1999) p.4 [9p].
Frost, P., Why Compassion Counts! Journal of Management Inquiry (June 1999) p.127 [7p].
Guilding, C., Cravens, K. & Tayles, M., An International Comparison of Strategic Management
Accounting Practices, Management Accounting Research (March 2000) p.113 [23p].
Halal, W., Corporate Community: A Theory of the Firm Uniting Profitability and Responsibility,
Strategy and Leadership (January 2000) p. 10 [7p].
Howard, R., Values Make the Company: An Interview with Robert Haas, Harvard Business Review
(September-October 1990) p.134 [11p].
Litman, J., Genuine Assets: Building Blocks of Strategy and Sustainable Competitive Advantage,
Strategic Finance (November 2000) p.37 [6p].
Martinson, O. and Ziegenfuss, D., Looking at What Influences Ethical Perception and Judgment,
Management Accounting Quarterly (Fall 2000) p.41 [7p].
Michlitsch, J., High-Performing, Loyal Employees: The Real Way to Implement Strategy, Strategy and
Leadership (January 2000) p.28 [6p].
Moriarity, S., Trends in Ethical Sanctions within the Accounting Profession, Accounting Horizons
(December 2000) p.427 [13p].
Moye, J. and Upton, D., Data Warehousing 101, Strategic Finance (February 2001) p.34 [5p].
Thorne, L., The Development of Two Measures to Assess Accountants Prescriptive and Deliberate Moral
Reasoning, Behavioral Research in Accounting (Vol. 122000) p.139 [31p].
Weber, J. & Wasieleski, D., Investigating Influences on Managers Moral Reasoning, Business and
Society (March 2001) p.79 [33p].
West III, G.P. & DeCastro, J., The Achilles Heel of Firm Strategy: Resource Weaknesses and Distinctive
Inadequacies, Journal of Management Studies (May 2001).
12
Chapter 1