Garrison 14e Chapter 1 Lecture

1. What is managerial accounting? a. Key differences between financial and managerial accounting i. _________________ 1. Financial reports are for _________________ users 2. Managerial reports are for _________________ users ii. Emphasis on the ______________ 1. Financial summarizes past activities 2. Managerial has a strong future orientation iii. _______________________ of data 1. Financial data should be objective and verifiable 2. Managerial focuses on relevant data, even if not completely objective or verifiable iv. __________ emphasis on _____________ 1. Financial focuses on precision when reporting to outsiders 2. Managerial aids decision makers by providing _______________________________________________ v. _________________ of organization 1. Financial concerned with companywide reports 2. Managerial focuses on segment reports: product lines, sales territories, divisions, departments, etc. vi. No externally imposed rules 1. Financial accounting conforms to GAAP and IFRS 2. Managerial accounting _______________________________ rather looks at cost-benefit vii. __________________________ 1. Financial is mandatory because outside parties require periodic financial statements 2. Managerial not mandatory will it be useful in decision making b. Managers have three main activities i. _______________ 1. Establishing goals & specifying how to achieve them 2. Accompanied by a _____________ - detailed plan for the future usually expressed in formal quantitative terms ii. ______________________

1. Gathering _________________ to ensure plan is being properly executed or modified as circumstances change 2. Includes preparing performance reports comparing budgeted to actual results to improve future performance iii. _________________________ 1. Selecting a course of action from competing alternatives 2. Decisions revolve around three questions a. What should we be selling? b. Who should we be serving? c. How should we execute? 2. Why does managerial accounting matter to your career? a. ______________ majors see Exhibit 1-3 page 6 b. ______________majors i. More than 80% of professional accountants in US work in non-public accounting environments ii. High likelihood that your future will involve working for a non-public accounting employer 1. Will need strong financial accounting skills AND 2. Will expect you to help improve organizational performance (managerial accounting skills) iii. Certified Management Accountant (CMA) designation globally respected credential 1. Exam complements CPA exam 2. Focuses on planning, controlling & decision making skills 3. www.imanet.org, 1-800-638-4427, or stop by instructors office 3. What skills do managers need to succeed? a. _____________________________________ i. Strategy __________________ enabling company to attract customers by distinguishing itself from competitors ii. Customer value propositions 1. ______________________________ respond to individual customer needs 2. _____________________________________ deliver products and services faster, more conveniently, and at a lower price 3. ___________________________ offer higher quality products b. ________________________________________ i. Process used by company to proactively identify risk it faces and manage those risks

ii. Most common risk management tactic is to reduce risks by implementing specific controls see Exhibit 1-5 page 10 c. __________________________________ i. Definitions 1. ____________________ series of steps followed to carry out some task in a business 2. _________________ major business functions that add value to companys products and services ii. __________________________ (Lean _________________ in non manufacturing sector) 1. Often called ___________________________ (JIT) production products made in response to customer orders and completed just-intime to be shipped 2. Traditional manufacturing methods organize work departmentally and encourage maximum output even if it exceeds customer demand and increases inventories 3. Lean thinking number of units produced tends to equal number of units sold 4. Lean approach results in fewer defects, less wasted effort, and quicker customer response times iii. ________________________________ (TOC) 1. Constraint or _____________________ is anything that prevents you from getting more of what you wantthe step that has the smallest capacity 2. TOC based on idea that effectively managing the constraint is key to success generate more business rather than cutting workforce 3. Four-step approach to process improvement a. First, identify weakest link in chain the constraint b. Second, dont place a greater strain on the system than the weakest link can handle c. Third, concentrate improvement efforts on strengthening weakest link d. Fourth, move to the next weakest link once improvement efforts are successful d. ________________________________ i. The question youre trying to answer defines how youll measure and how you analyze it 1. Net income historical financial data that complies with rules 2. How to serve customers non-financial, process-oriented data

3. Will you need to borrow money estimate cash flows ii. Primary purpose of this course is to help you develop measurement skills used by managers to support planning, controlling, and decision making activities e. ______________________________ i. Technical competence within your area of expertise and with respect to operations outside your functional area of expertise ii. Be a person of high integrity iii. Understand how to implement organizational change iv. Have strong communication skills v. Be capable of motivating and mentoring other people vi. Effectively manage team-based decision processes 4. Importance of _______________ in business a. IMAs Statement of Ethical Professional Practice (Exhibit 1-9, page 16) i. Guidelines for ethical behavior 1. __________________ 2. Confidentiality 3. __________________ 4. Credibility ii. Guidelines for resolution of ethical conflict 1. Follow organizations established policies for resolving ethical conflict 2. If it doesnt work, work your way up the line of control (with supervisors knowledgeassuming not involved), clarify relevant ethical issues, consult an attorney b. Why have ethical standards? i. If standards not followed in business, then economy and all of us would suffer ii. Failure to have good ethics can lead to lower standard of living with lowerquality goods and services, less to choose from, higher costs, and higher prices