what is managerial accounting? the process of identification, measurement, accumulation, analysis,...
TRANSCRIPT
WHAT IS MANAGERIAL ACCOUNTING?
The process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources.
Institute of Management Accountants, Statement on Management Accounting #1A, 1981
The process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources.
Institute of Management Accountants, Statement on Management Accounting #1A, 1981
AGAIN I ASK, WHAT IS MANAGERIAL ACCOUNTING?
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.
Institute of Management Accountants, Statement on Management Accounting, Definition of Management Accounting, 2008
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.
Institute of Management Accountants, Statement on Management Accounting, Definition of Management Accounting, 2008
IN SIMPLER TERMS…
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
GAAP
An internal rather than external focus
Lack of mandated rules
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
An internal rather than external focus
Lack of mandated rules
Focus on operating segments
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
© geopaul/iS
tockphoto
An internal rather than external focus
Lack of mandated rules
Focus on operating segments
Focus on the future
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
© Michelle Hillmer/iStockphoto
An internal rather than external focus
Lack of mandated rules
Focus on operating segments
Focus on the future
Emphasis on timeliness
MANAGERIAL ACCOUNTING vs. FINANCIAL ACCOUNTING
© Mirjana Jovic/iStockphoto
WHAT DO MANAGERS DO?
Planning
Controlling
Evaluating
Decision Making
PLANNING IS…
What: Setting strategic and operational goals and objectivesTranslating these into specific activitiesAllocating resources for their achievement
Who: Upper and middle managers
When: Strategic: annually, with a 5 to 10 year horizonOperational: monthly, quarterly, or annually
CONTROLLING IS…
What: Monitoring day-to-day operationsExerting managerial influence on operations to
conform to plansTaking corrective action as needed
Who: Managers and line workers
When: In real time – hourly, daily, weekly
EVALUATING IS…
What: Comparing actual results to planned resultsAssessing individual performanceTaking corrective action as needed
Who: Managers
When: Weekly, monthly, quarterly, or annually
DECISION MAKING IS…
What: Using information to choose the best alternative from available options made in pursuit of a particular goal or objective
Who: Managers and line workers
When: As needed
MANAGER PRACTICE SESSION 1
What is your plan (goal) for the course?
How will you control your day-to-day operations?
How will you evaluate your performance?
What decisions will you make?
Think of yourself as the manager in your approach to this managerial accounting course.
Think of yourself as the manager in your approach to this managerial accounting course.
STRATEGY DETERMINES INFORMATION NEEDS
An organization needs to set strategies first and then determine the information required to monitor achievement of those strategies
Different strategies require different information sets• Product differentiation vs. low-cost production• Market share: build, hold, harvest, or divest
Many tools are available to provide this information and assist in decision making activities
THE BALANCED SCORECARD
Developed in the early 1990s to provide a multidimensional assessment of strategic achievement
Measures go beyond traditional financial indicators of success
SUPPLY CHAIN MANAGEMENT
A network of trading partners (customers and suppliers)
From raw material creation to end user
Get the right products to the right location, in the right quantities, at the right time, at the right cost
Identify the supply chain trading partners involved in getting your textbook for this course into your hands. Identify the supply chain trading partners involved in getting your textbook for this course into your hands.
JUST-IN-TIME (JIT) INVENTORY
An inventory management philosophy that attempts to minimize the amount of inventory on hand
Requires frequent deliveries of small lots of materials
Requires a complementary quality program since there is no extra inventory to replace defective components
ENTERPRISE RESOURCE PLANNING (ERP) SYSTEMS
An information system that integrates the organization’s data into a single system
Facilitates the sharing of information across the organization to support decision making activities
WHAT IS ETHICAL BEHAVIOR?
Knowing right from wrong, and then doing the right thing
Ethical behavior is not necessarily the same thing as legal behavior
Unethical behavior can result in catastrophic results
Top managers in the organization must model ethical behavior for the rest of the organization
IMA STATEMENT OF ETHICAL PROFESSIONAL PRACTICE
Overarching principles: Honesty, Fairness, Objectivity, Responsibility
Four standards• Competence• Confidentiality• Integrity• Credibility
Steps to resolve ethical conflict
UNETHICAL BEHAVIOR IS AROUND
Sources: Ethics Resource Center, National Business Ethics Survey: How Employees View Ethics in Their Organizations 1994-2005 and National Business Ethics Survey: An Inside View of Private Sector Ethics, 2007