MAHM6e Ch01.Ab.az

7/30/2019 MAHM6e Ch01.Ab.az

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An electronic

presentation byDouglas CloudPepperdine University


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Task Force Clip Art

included in this electronic

presentation is used withthe permission of New

Vision Technology of

Nepean Ontario, Canada.


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Introduction:

The Role,

History, andDirection of

ManagementAccounting

CHAPTER


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1. Discuss the need for management accounting

information.

2. Differentiate between management accounting

and financial accounting.

3. Provide a brief historical description of

management accounting.

4. Identify the current focus of managementaccounting.

Objectives

After studying this

chapter, you should

be able to:

Continued


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5. Describe the role of management accountants in

an organization.

6. Explain the importance of ethical behavior for

managers and management accountants.

7. List three forms of certification available to

management accountants.

Objectives


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1. To provide information for costing outservices, products, and other objects ofinterest to management.

2. To provide information for planning,controlling, evaluating, and continuousimprovement.

3. To provide information for decisionmaking.

The managerial accounting system has three

broad objectives:


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OutputsProcessesInputsEconomic Events

Collecting

Measuring

Storing

Analyzing

ReportingManaging

Special Reports

Product Costs

Customer Costs

Budgets

Performance ReportsPersonal Communication

Users

Management Accounting

Information System


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TheManagement Process is defined by the

following activities:

Planning

Controlling

Decision Making

Planning requires

setting objectivesand identifying

methods to achieve

those objectives.

Management Process


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following activities: Controlling isthe managerial

activity of

monitoring a

plans

implementation

and taking

corrective action

as needed.

Planning

Controlling

Decision Making

Management Process


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Planning

Controlling

Decision Making

Control isusually achieved

with the use of

feedback.

Management Process


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Feedback is information

that can be used to evaluate

or correct the steps being

taken to implement a plan.

Management Process


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Decision

making is

the process

of choosingamong

competing

alternatives.

Planning

Controlling

Decision Making

Management Process


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Differentiate Between

Management Accounting and

Financial Accounting


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Management Accounting Financial Accounting

1. Internally focused 1. Externally focused


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Management

accounting

focuses on

providing

information for

internal users.

Targeted Users


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ABC

Company

AnnualReport

Financial

accounting focuses

on provided

information for

external users.

Targeted Users


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2. No mandatory rules 2. Must follow externallyimposed rules


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Restrictions on Inputs and Processes

Management accounting is not subject

to the requirements of generally

accepted accounting principles.

Financial accounting reporting must

follow the accounting procedures set by

the SEC and the FASB.


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3. Financial andnonfinancial informa-

tion; subjectiveinformation possible

3. Objective financialinformation


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Types of Information

The restrictions imposed on

financial accounting tend to

produce objective and verifiable

financial information.

For management accounting, the

financial or nonfinancial

information may be much more

subjective in nature.


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4. Emphasis on the future 4. Historical orientation


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TimeOrientation

Management

accounting stronglyemphasizes providing

information about

future events.


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Financialaccounting records

and reports events

that have already

happened.

TimeOrientation


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5. Internal evaluation anddecisions based on verydetail information

5. Information about thefirm as a whole


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Management

accounting provides

measures and internalreports used the

evaluate performance of

entities, product lines,

departments, and

managers.

Degree of Aggregation


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Financial

accounting focuses

on overall firm

performance.

Degree of Aggregation


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5. Internal evaluation anddecisions based on verydetail information

5. Information about thefirm as a whole

6. Broad, multidisciplinary 6. More self-contained


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Management accounting is much

broader than financial accounting.

It includes aspects of managerial

economics, industrial engineering,

and management science.

Breadth

Historical Description of


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Management Accounting

1880 - 1925 Most of the product-costing and internal

accounting procedures used in this century

were developed

1925 Emphasis of inventory costing for externalreporting

1950s/60s Effort to improve the managerial

usefulness of traditional cost systems

1980s/90s Significant efforts have been made toradically change the nature and practice of

management accounting


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Current Focus of Management Accounting

Activity-Based Management

Activity-based management is a system

wide, integrated approach that focusesmanagements attention on activities with the

objective of improving customer value and

the resulting profit.


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Customer Orientation

Customer value is the difference between

what the customer receives (customersatisfaction) and what the customer gives up

(customer sacrifice).

What is received is called the total product.


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Strategic Positioning

Strategic cost management is the use of cost data

to develop and identify superior strategies thatwill produce a sustainable competitive advantage.

Strategies:

1) Cost leadership

2) Superior products through differentiation


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Value-Chain Framework

The internal value chain is the set of activities

required to design, develop, produce, market,and deliver products and services to customers.

The industrial value chain is the linked set of

value-creating activities from basic rawmaterials to the disposal to the final products by

end-use customers.


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Supermarkets

Value Chain:

Apple Industry

Planting and

Cultivating

Harvesting

Distribution of

Apples

Applesauce

Production

ApplesauceDistribution

Firm

B

Firm

C

Firm

A

Product Disposal

End-Use Customer


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Managing the value chain means

that a management accountant

must understand many functionsof the business, from

manufacturing to marketing.


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The philosophy of total quality

management is to manufacture

perfect products.

This emphasis on quality has

created a demand for managementaccounting systems that provide

financial and nonfinancial

information about quality.


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The role of

management

accountants in an

organization is one

of support.

Partial Organization Chart


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Manufacturing Company

President

Production

Vice President

Line Function

Financial

Vice President

Staff Function

Production

Supervisor

Machining

Foreman

Assembly

Foreman

Controller Treasurer

Internal

AuditCost Financial Systems

Ta

x


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Ethical

Behavior

Michael Josephsons* Ten Ethical Values:

Honesty

Integrity

Promise keeping

Fidelity

Fairness

Caring for others

Respect for others

Responsible

citizenship

Pursuit of excellence

Accountability

*Michael Josephson, Teaching Ethical Decision Making and Principled

Reasoning


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CMA: One of the main purposes of the CMA was to establish

management accounting as a recognized, professional

discipline, separate from the profession of public

accounting.

CPA: The responsibility of a CPA is to provide assurance

concerning the reliability of financial statements.CIA: The focus of the CIA is to recognize competency in

internal auditing rather than external auditing as with

the CPA.

Professional Certifications

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The CMA

Four areas emphasized on the exam:

1) Economics, finance, and management

2) Financial accounting and reporting

3) Management report, analysis, and behavioral

issues

4) Decision analysis and information systems

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The End

Chapter One

Documents

MAHM6e Ch01.Ab.az