Chapter 1

The Changing Role of Managerial Accounting in a Global 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

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Managing Resources, Activities, and People

An organization . . .
Directing

Acquires Resources

Organized set of activities

Decision Making

Controlling

Planning

Hires People
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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 organizations goals. Measuring performance of subunits, activities, managers, and other employees. Assessing the organizations competitive position.
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Managerial versus Financial Accounting

Accounting System (accumulates financial and managerial accounting data in the cost accounting system) Managerial Accounting Information for decision making, planning, and controlling an organizations operations. Internal Users Financial Accounting Published financial statements and other financial reports.

External Users
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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 organiz 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. Source of Data The organization's basic Almost exclusively drawn from the accounting system, plus various organization's basic accounting other sources, such as rates of system, which accumulates effective products manufactured, financial information. physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays Nature of Reports Reports often focus on subunits Reports focus on the enterprise in and Procedures within the organization, such as its entirety. Based almost departments, divisions, exclusively on historical geographical regions, or product transaction data. lines. Based on a combination of 1-6 historical data, estimates, and

Major Themes in Managerial Accounting

Behavioral Issues Costs and Benefits

Information and Incentives

Evolution and Adaptation

Managerial Accounting
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Evolution and Adaptation in Managerial Accounting

E-Business Service vs. Manufacturing Firms Product Life Cycles Time-Based Competition

Emergence of New Industries

Global Competition Focus on the Customer Cross-Functional Teams

Change

Information and Communication Technology Just-in-Time Inventory Total Quality Management Continuous Improvement
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Cost Management Systems

Objectives
Measure the cost of resources consumed. Identify and eliminate non-value-added costs.

Cost Management System

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Cost Management Systems

Objectives
Determine efficiency and effectiveness of major activities. Identify and evaluate new activities that can improve performance.

Cost Management System

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

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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

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Professional Ethics
Competence Confidentiality Integrity Credibility

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End of Chapter 1

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