Managerial Accounting:

An Overview
Chapter 1

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright2015byMcGrawHillEducation.Allrightsreserved.

1-2

Financial and Managerial

Accounting: Seven Key Differences

1-3

Work of Management
Planning
Planning

Controlling
Controlling
Decision
Decision
Making
Making

1-4

Planning
Establish
Establish Goals.
Goals.

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

Develop
Develop Budgets.
Budgets.

1-5

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 in
in the
the form
form of
of 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.

1-6

Decision Making
Decision making
making involves
involves
making
making aa selection
selection among
competing
competing alternatives.
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?

1-16

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

80%

Employers expect accounting majors

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

1-17

Certified Management Accountant

A management
management accountant
accountant
who
who has
has the
the necessary qualifications
qualifications
and
and who
who passes a rigorous professional
exam
exam earns
earns the
the right
right to
to be
be known
known as
as aa
Certified
Certified Management
Management Accountant
Accountant
(CMA).
(CMA).

1-18

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 IMAs
IMAs website
website at
at www.imanet.org
www.imanet.org or
or by
by calling
calling 1-800-638-4427.
1-800-638-4427.

1-19

Managerial Accounting: Beyond the

Numbers
The primary purpose
of this course is to
teach measurement
skills that managers
use to support
planning, controlling,
and decision making
activities.

Planning
Planning

Controlling
Controlling
Decision
Decision
Making
Making

1-20

Managerial Accounting: Beyond the

Numbers
Measuremen
t skills help
managers
answer
important
questions.

What
What net
net income
income should
should my
my company
company
report
report to
to its
its stockholders?
stockholders?
Measure
Measure and
and report
report historical
historical data
data
that
that complies
complies with
with applicable
applicable rules.
rules.
How
How will
will my
my company
company serve
serve its
its customers?
customers?
Measure
Measure and
and analyze
analyze mostly
mostly nonnonfinancial,
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.

1-21

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

1-22

An Ethics Perspective
The Institute of Management Accountants (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
professional
professional
competence.
competence.

Competence

Follow
Follow applicable
applicable
laws,
laws, regulations,
regulations,
and
and standards.
standards.

Provide
Provide accurate,
accurate, clear,
clear, concise,
concise, and
and
timely
timely decision
decision support
support information.
information.

1-23

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 for
for
unethical
unethical or
or illegal
illegal
advantage.
advantage.

Confidentiality
Confidentiality
Ensure
Ensure that
that subordinates
subordinates do
do
not
not disclose
disclose confidential
confidential
information.
information.

1-24

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
carrying
carrying out
out
duties
duties ethically.
ethically.

Integrity
Abstain
Abstain from
from activities
activities that
that
might
might discredit
discredit the
the
profession.
profession.

1-25

IMA Guidelines for Ethical Behavior

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

Credibility
Credibility
Disclose
Disclose all
all relevant
relevant
information
information that
that could
could
influence
influence aa users
users
understanding
understanding of
of reports
reports
and
and recommendations.
recommendations.

Disclose
Disclose delays
delays or
or
deficiencies
deficiencies in
in information
information
timeliness,
timeliness, processing,
processing, or
or
internal
internal controls.
controls.

1-26

IMA Guidelines for Resolution of an

Ethical Conflict
Follow
Follow employers
employers established
established policies.
policies.
IfIf this
this does
does not
not work,
work, consider
consider the
the 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.
IfIf 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 supervisors
supervisors
knowledge,
knowledge, assuming
assuming the
the supervisor
supervisor is
is not
not involved.
involved.

1-27

IMA Guidelines for Resolution of an

Ethical Conflict
IfIf following
following employers
employers established
established policies
policies for
for conflict
conflict
resolution
resolution do
do 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 an
an attorney
attorney as
as to
to legal
legal obligations.
obligations.

1-28

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.

1-29

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 point
point of a
companys
companys strategy
strategy should
should
be its
its target
target customers.
customers.

1-30

Customer Value Propositions

Customer
Intimacy
Strategy

Understand and respond to

individual customer needs.

Operational
Excellence
Strategy

Deliver products and services

faster, more conveniently,
and at lower prices.

Product
Leadership
Strategy

Offer higher quality products.

1-31

An Enterprise Risk Management

Perspective
A process used
by a company to
proactively identify
and manage risk.

Should I try to avoid the

risk, accept the risk, or
reduce the risk?

Once
Once aa company
company identifies
identifies its risks, perhaps
perhaps the
most
most common
common risk
risk management
management tactic
tactic is
is to reduce
reduce
risks
risks by
by implementing
implementing specific
specific controls.
controls.

1-32

An Enterprise Risk Management

Perspective

1-33

A Corporate Social Responsibility

Perspective
Corporate social responsibility (CSR) is a concept
whereby organizations consider the needs
of all stakeholders when making decisions.

Customers

Employees

Suppliers

Communities

Stockholders

CSR extends beyond legal compliance

to include voluntary actions that satisfy
stakeholder expectations.

Environmental
& Human Rights
Advocates

1-34

Corporate Social Responsibility

1-35

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.

R&D

Product
Design

Customer
Manufacturing Marketing Distribution Service

Business functions making up the value chain

1-36

Lean Production

Customer places
an order

Create Production
Order

Generate component
requirements

Goods delivered
when needed

Production begins
as parts arrive

Components
are ordered

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

1-37

Lean Production
Traditional Manufacturing

Produce goods in
anticipation of Sales

Store
Inventory

Make Sales from

Finished Goods
Inventory

1-38

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.

1-39

A Leadership Perspective
Organizational leaders unite the
behavior of employees around
two common themespursuing
strategic goals and making
optimal decisions.

Factors that influence behavior:

Intrinsic Motivation
Extrinsic Incentives
Cognitive Bias

1-40

End of Chapter 1