Chapter 1: Managerial Accounting: An Overview

Managerial Accounting: An OverviewChapter 1Financial and Managerial Accounting: Seven Key DifferencesWork of Management PlanningDecision MakingControllingPlanningEstablish Goals.Specify How Goals Will Be Achieved.Develop Budgets.ControllingThe control function gathers feedback to ensure that plans are being followed. Feedback in the form of performance reportsthat compare actual results with the budgetare an essential part of the control function.Decision MakingDecision making involves making a selection among competing alternatives.What should we be selling?Who should we be serving?How should we execute?Accounting MajorsEmployers 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. The IMA estimates that more than 80% of professional accountants in the U.S. work in non-public accounting environments.80%Certified Management AccountantA management accountantwho has the necessary qualifications and who passes a rigorous professional exam earns the right to be known as a Certified Management Accountant (CMA).Managerial Accounting: Beyond the NumbersControllingPlanningDecisionMaking The primary purpose of this course is to teach measurement skills that managers use to support planning, controlling, and decision making activities.Managerial Accounting: Beyond the NumbersWhat net income should my company report to its stockholders?Measure and report historical data that complies with applicable rules.How will my company serve its customers?Measure and analyze mostly non-financial, process-oriented data.Will my company need to borrow money?Measure and analyze estimated future cash flows.Measurement skills help managers answer important questions.Managerial Accounting: Beyond the NumbersSix Business Management Perspectives that go beyond the numbers to enable intelligent planning, control, and decision making:An Ethics PerspectiveA Strategic Management PerspectiveAn Enterprise Risk Management PerspectiveA Corporate Social Responsibility RespectiveA Process Management ProspectiveA Leadership PerspectiveAn Ethics PerspectiveCompetenceFollow applicablelaws, regulations,and standards. Maintain professional competence. Provide accurate, clear, concise, and timely decision support information. Recognize and communicate professional limitations that preclude responsible judgment.The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice provides guidelines for ethical behavior.A Strategic Management PerspectiveA strategyis a “game plan”that enables a companyto attract customersby distinguishing itselffrom competitors.The focal point of acompany’s strategy shouldbe its target customers.An Enterprise Risk Management PerspectiveA process usedby a company toproactively identifyand manage risk.Once a company identifies its risks, perhaps themost common risk management tactic is to reduce risks by implementing specific controls.Should I try to avoid the risk, accept the risk, or reduce the risk? A Corporate Social Responsibility PerspectiveCSR extends beyond legal complianceto include voluntary actions that satisfy stakeholder expectations. Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. CustomersEmployeesCommunitiesSuppliersStockholdersEnvironmental & Human RightsAdvocatesA Process Management PerspectiveBusiness functions making up the value chain Product Customer R&D Design Manufacturing Marketing Distribution ServiceA businessprocess is a series ofsteps that are followed in order tocarry out some task ina business.A Leadership PerspectiveOrganizational leaders unite the behavior of employees around two common themes—pursuing strategic goals and making optimal decisions. Factors that influence behavior:Intrinsic MotivationExtrinsic IncentivesCognitive BiasEnd of Chapter 1