2. TABLE OF CONTENTS
• Summary
• Identify managers’ three primary responsibilities
• Distinguish financial accounting from managerial accounting
• Describe the roles and skills required of management
accountants within the organization
• Describe the role of the Institute of Management Accountants
(IMA) and apply its ethical standards
• Discuss the business trends and regulations affecting
management accounting
4. SUMMARY
• Regardless of your college major or intended career path, most of
you will become managers one day. A manager has responsibility
and control of selected parts of a company’s operations, or in some
cases, multiple aspects of a company.
• Only those of you that happen to stay at the ‘bottom’ of a company,
preferring never to get promoted, or never accept any responsibility
for some aspect of a business, will miss out on the management
opportunity.
• Fortunately, none of you will likely fall into this persona given that
you have taken the initiative to attend college. As you learned in
financial accounting, accounting is the language of business.
• As a manager, if you do not understand the language, you will not be
able to use it to make decisions. Understanding managerial
accounting will help you move up the ladder more quickly,
regardless of your chosen career path
5. SUMMARY
• How Can Managerial Accounting Help You? As an student in a
college class, you likely want to how your performance will be
evaluated. Your expectations in a business environment are
similar. You want to know what your boss will expect, i.e., how
he or she measure your performance. While you won’t be
earning letter grades in the business world, your performance
will ultimately translate into promotions, bonuses, raises,
reprimands, or perhaps a dreaded termination slip. The more
you know about accounting, the more quickly you will
advance in a company. Ultimately, accounting is the language
of business.
6. SUMMARY
• Management accounting refers to accounting information developed
for managers within an organization. In other words, management
accounting is the process of identifying, measuring, accumulating,
analyzing, preparing, interpreting, and communicating information that
helps managers fulfill organizational objectives. This is the phase of
accounting concerned with providing information to managers for use in
planning and controlling operations and in decision making.
• Managerial accounting is concerned with providing information to
managers-that is people inside an organization who direct and control
its operations. In contrast, financial accounting is concerned with
providing information to stockholders, creditors, and others who are
outside an organization. Managerial accounting provides the essential
data with which organizations are actually run. Financial accounting
provides the scorecard by which a company’s past performance is
judged.
• Because it is manager oriented, any study of managerial accounting
must be preceded by some understanding of what managers do, the
information managers need, and the general business environment.
8. WHATISMANAGERIALACCOUNTING?
• Managerial accounting is often referred to as management accounting. The Institute
of Management Accountants describes management accounting as “a profession that
involves partnering in management decision-making, devising planning and
performance management systems, and providing expertise in financial reporting
and control to assist management in the formulation and implementation of an
organization’s strategy.”
• In short, managerial accounting supports the decision making process through
planning and controlling operations. Planning primarily occurs in the budgeting
process. Controlling occurs when managers compare actual performance with
budgeted amounts to identify differences and then act upon any differences that
appear to be significant.
9. MANAGERS’ RESPONSIBILITIES
Setting goals and
objectives
Overseeing day-to-day
operations
Evaluating results
of operations
Directing
Decision
Making
Planning
Controlling
10. PLANNING
From an accounting perspective,
planning is the communication of a
company’s goals. Because ultimately a
company’s results are translated into
dollars, planning is achieved through the
budgeting process as a basis for
decisions made by managers.
Budgets are the financial plans of a
company. They identify the sources or
inflows of economic resources, and the
uses or outflows of economic resources
of a company.
Budgets identify the source from which
assets will be derived and how they will
be used. They ultimately create
benchmarks of profits, cash flows, and
the financial position that the company
expects to achieve.
Setting goals and objectives
and how to achieve them
Examples - Generate more
sales via opening new stores.
Reduce labor costs by
reducing store hours
Budgets – the financial plan
for inflows and outflow
11. DIRECTING
• While planning for the future, managers
have to oversee and supervise day-to-
day business undertakings.
• They have to delegate roles and
responsibilities, guide the employees
on how to accomplish their chores,
motivate and inspire them until the
fulfillment of the tasks, and respond to
employees’ queries on how to pull off
their tasks.
• Using a computerized accounting
system, managerial accountants take
into account and list all the assignments
and undertakings that must be realized.
• Some of these include running trial
balances and wrapping up accounting
processes every end of the month.
Overseeing company’s
day-to-day operations
Example: Using
daily/weekly sales
reports to adjust
marketing strategies
Example: Using
product cost reports to
adjust raw material
usage
12. CONTROLLING
• Controlling keeps all business
activities on track and identifies
if the company’s objectives are
met.
• According to University of North
Florida, this can be achieved by
measuring performance,
comparing actual performance
with budgets, and taking action
when needed.
• In evaluating and assessing the
performance, managers have
different gauges
Evaluating results of
operations against plans and
making adjustments as
needed
Example: Comparing
budgeted sales with actual
sales to take corrective
actions
Example: Comparing
budgeted product costs
against actual product costs
to take corrective actions
13. DECISION MAKING
• Good decisions are derived from
tireless accession and
assessment of information. With
good decisions comes business
value.
• Managerial accounting supplies
the information necessary to
incite decision-making processes.
• Also, the management team
determines which among the
other possible choices or courses
of action will support the
company in effectively achieving
its objectives.
Management is continually
making decisions while it
plans, directs, and controls
operations
Price setting or product
offerings
Renovation of facilities
Operation openings or
closings
15. MANAGERIAL VS. FINANCIAL ACCOUNTING
• Managerial accounting and
financial accounting are two of
the most prominent branches of
accounting.
• They both deal with processing
information which is useful in
decision-making; however, they
have notable differences that
distinguish them from each
other.
• Managerial accounting processes
economic information to be used
by management in making
decisions.
• Financial accounting involves the
preparation of general-purpose
financial statements used by
various users in making informed
decisions.
16. MANAGERIAL VS. FINANCIAL ACCOUNTING
Issue Managerial Financial
Primary users Internal External
Purpose of information
Plan, direct, control,
decide
Users make investing and
lending decisions
Primary accounting
product
Internal reports useful to
management
General purpose financial
statements
What is included? Defined by management Determined by GAAP
Underlying basis of
information
Internal & external
transactions, focus on
future
Based on historical
transactions with external
parties
16
17. Issue Managerial Financial
Emphasis Data must be relevant
Data must be reliable and
objective
Business Unit Segments of the business Company as a whole
Preparation
Depends on
management needs
Annually & quarterly
Verification Internal audit External audit
Information
requirements
No requirements
SEC requires publicly traded
cos. to issue audited fin. sts.
Impact on employee
behavior
Careful consideration Adequacy of disclosure
MANAGERIAL VS. FINANCIAL ACCOUNTING
17
19. ORGANIZATIONAL STRUCTURE
Board of
Directors
Chief Executive
Officer
Chief Operating
Officer
Chief Financial
Officer
Vice Presidents
of various
operations
Treasurer Controller Internal Audit
Audit
Committee
19
20. ORGANIZATIONAL STRUCTURE
• A typical organizational structure for publicly held companies starts with the board of
directors, elected by the stockholders (owners) of the company to oversee the
company. Because the board meets only periodically, they hire a chief executive
officer (CEO) to manage the day to day operations.
• The CEO hires other executives to run various aspects of the organization, including
the chief operating officer (COO) and the chief financial officer (CFO). The COO is
responsible for the company’s operations, and the CFO is responsible for all of the
company’s financial concerns.
21. ORGANIZATIONAL STRUCTURE
• The internal audit department reports to the CFO or CEO for day-to-day
administrative matters. This internal audit department also reports to a
subcommittee of the board of directors called the audit committee.
• The audit committee oversees the internal audit function as well as the annual
financial statement audit by independent CPAs.
• Both the internal audit department and the independent CPAS report to the audit
committee for one reason: to ensure management will not intimidate them or bias
their work.
22. CHANGING ROLES OF MANAGEMENT ACCOUNTANTS
• Technology has changed the roles of
management accountants.
• They are still involved with the
traditional tasks of ensuring accurate
financial records, however,
computers have taken over the task
of performing routine mechanical
accounting tasks.
• Freed from the routine mechanical
work, management accountants
spend more time planning, analyzing
and interpreting accounting data to
provide decision support.
Impact of technology
Ensuring accurate
financial records
Planning, analyzing, and
interpreting accounting
data
Providing decision
support
23. REQUIRED SKILLS OF MANAGERIAL ACCOUNTANTS
• Today’s management accountant
requires solid knowledge of both
financial and managerial
accounting, analytical skills,
knowledge of how a business
functions, the ability to work on a
team, and oral and written
communications skills.
Knowledge of
financial and
managerial
accounting
Analytical skills
(critical thinking)
Knowledge of how
a business
functions
Ability to work on
a team
Oral and written
communications
skills
24. THE ROLES AND SKILLS REQUIRED OF MANAGEMENT
ACCOUNTANTS WITHIN THE ORGANIZATION
VideoTime–“WhyMarketsandClientsNeedCreativeAccountants”
“Dr. Stone explains how to be a creative
accountant while also being ethical”.
Dr. Dan Stone is Gatton Endowed Chair
at the University of Kentucky, C.P.A.,
where he holds a joint appointment in
the Von Allmen School of Accountancy
and the School of Management. Dr.
Stone is Director of Graduate Studies
and Director of the PhD program for the
Von Allmen School of Accountancy. He
has published over 40 academic works,
including articles, essays, and poetry. His
recent research investigates online
deception, dual-process models of the
effects of financial reward, and
knowledge sharing and motivation
quality among professionals.
https://www.youtube.com/watch?v=Fsq
kwS88Rhg
25. DESCRIBETHE ROLEOF THE INSTITUTEOF MANAGEMENT ACCOUNTANTS(IMA)
AND USE ITSETHICALSTANDARDSTO MAKE REASONABLEETHICALJUDGMENTS
Section 4
26. InstituteOfManagementAccountants(IMA)
www.imanet.org
• The Institute of Management
Accountants (IMA) is the professional
association for management
accountants.
• The goal of the IMA is to advance the
management accounting profession
primarily through certification,
practice development, education
and networking.
• The IMA issues two different
professional certifications: the
Certified Management Accountant
(CMA) and the Certified Financial
Manager (CFM).
Certification
(CMA)
Practice
Development
Education Networking
Ethical
Standards
Public
Education
27. SUMMARYOFIMA ETHICALSTANDARDS
• The IMA Statement of Ethical
Professional Practice requires
compliance with 4 ethical
standards: Competence,
Confidentiality, Integrity and
Credibility.
• Failure to comply with the
standards may result in
disciplinary action.
Maintain
professional
competence
Preserve
confidentiality of
information
Uphold integrity
Perform duties
with credibility
28. ETHICALBEHAVIOR
• Why should we do anything, let alone
the right thing, if what we are being
asked to do (or what we are observing
others doing) is legal and unobservable?
• The simple answer to this question is:
values. An ethical dilemma occurs
when we find ourselves in a situation or
circumstance that conflicts with our
personal values.
• These values, which are cross-cultural
and universal include: honesty, respect,
responsibility, fairness, and
compassion.
• Examples of unethical behavior:-
allowing reimbursement of false
expense reports, manipulating income,
performing tasks not qualified to
perform.
29. ETHICALBEHAVIOR
Steps to resolveethicaldilemmas
• To resolve ethical dilemmas, the IMA
suggests that management accountants
• first follow their company’s established
policies for reporting unethical behavior.
• If not resolved in this way, discuss the
situation with the immediate
supervisor unless the supervisor is
involved in the unethical situation.
• If the immediate supervisor is involved
and is the CEO, notify the audit
committee or board of directors.
• Discuss the unethical situation with an
objective advisor such as an IMA ethics
counselor for clarification.
• Consulting an attorney regarding legal
obligations and rights is also advisable.
Follow company’s policies for
reporting unethical behavior
Discuss with immediate
supervisor
Discuss with objective
advisor
Consult an attorney
30. DISCUSS TRENDS IN THE BUSINESS ENVIRONMENT
VideoTime–“WhydoweHateWhistle-Blowers?”
“Why do we hate whistle-blowers?” she
touches on the lessons learned from
whistle-blowers in some of the nation’s
most high-profile cases and make the
argument for why we need more
whistle-blowers”
Kelly Richmond Pope, Associate
Professor in the School of Accountancy
and MIS at DePaul University in Chicago,
IL. My passion is white-collar crime. My
research has been published in such
journals as Behavioral Research in
Accounting, Auditing: A Journal of
Practice and Theory, Journal of Business
Ethics, The CPA Journal and Journal of
Accountancy.
https://www.youtube.com/watch?v=J1O
oFvcTess
32. CURRENT TREND
• In the last century, North
American economies have
shifted away from manufacturing
toward service companies, with
the latter comprising the largest
sector of the US economy and
employing 55% of the workforce.
• The costs of international trade
have plummeted over the past
decade, allowing foreign
companies to compete with
domestic firms. To compete in
this global market,
manufacturers have moved
operations to other countries to
be closer to new markets and
less expensive labor.
Competing in global
marketplace
Time-based
competition
Advanced
Information Systems
E-Commerce
33. CURRENT TREND
• Large companies are turning to more
advanced information systems:
enterprise resource planning (ERP)
systems integrate all of a company’s
worldwide functions, departments
and data. Companies use the Internet
in everyday operations, such as
budgeting, planning, selling and
customer service. This new “sales
clerk” can sell to thousands of
customers at once, 24 hours a day,
365 days a year without a break or
vacation.
Just-in-Time
Management
Total Quality
Management
ISO Certification
Cost Benefit Analysis
34. CURRENT TREND
• Just-in-Time Management reduces the
cost of holding inventory by only
beginning production when there is an
order from a customer. This means that
raw materials are not stored before
production, and finished units are
shipped directly to the customer when
they are completed.
• In Total Quality Management (TQM)
each business function examines its
own activities and works to improve
performance by continually setting
higher goals.
• The International Organization for
Standardization (ISO) has developed
international quality management
standards and guidelines. Earning this
certification provides competitive
advantage in the global marketplace.
• Cost Benefit Analysis weighs costs
against benefits of undertaking
improvement initiatives.
Just-in-Time
Management
Total Quality
Management
ISO Certification
Cost Benefit Analysis
