8/13/2019 Lecture 1a_Managerial Accounting, The Business Organization, And Professional Ethics
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The Business Organization,and Professional Ethics
Introduction to Management AccountingManagerial Accounting:
When you have finished studying this chapter,you should be able to:
1. Describe the major users and uses of
accounting information.
2. Describe the cost-benefit and behavioralissues involved in designing an accounting
system.
3. Explain the role of budgets and
performance reports in planning and control.
Learning Objectives
8/13/2019 Lecture 1a_Managerial Accounting, The Business Organization, And Professional Ethics
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Scorekeeping:Evaluate
OrganizationalPerformance
Attention Directing:Compare Actual
Results to Expected
Problem Solving:Assess Possible
Courses of Action
Decision Making
Process of gathering, organizing, andcommunicating financial information
Financial
Statements
Accounting Information System
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Influences on Accounting Systems
Generally accepted accounting principles (GAAP)
Foreign Corrupt Practices Act
Internal controls
Management audits
Sarbanes-Oxley ActInternal auditors
Sarbanes-Oxley Act
In 2002, the Sarbanes-Oxley Act requiredchief executive officers to sign a
statement verifying the accuracy of the company’s financial statements.
External auditors must examine and reporton the company’s internal control system.
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Cost-Benefit and BehavioralConsiderations
Cost-benefitbalance
Behavioralimplications
Weigh estimated
costs againstprobable benefits.
The system must provideaccurate, timely budgets andperformance reports in a form
useful to managers.
Managers must use accountingreports, or the reports
create no benefits.
Planning and Control
Accounting information helps managersplan and control the organization’s operations.
Planning:Setting objectivesand outlining howthe objectiveswill be obtained.
Control:Implementing plansand using feedback toevaluate the attainmentof objectives.
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The Nature of Planning and Controlling
PlanningIncrease
Profitability
Control
– Actions– Evaluations
C o r r e c t i o
n s
a n d r
e v i s i o n s
o f
p l a n s
a n d a
c t i o n s
Budgets,SpecialReports
AccountingSystem
PerformanceReports
Customersurveys
Competitoranalysis
Advertisingimpact
New itemsreport
Internal Accounting SystemManagement Process
Other informationsystems
Budget and Performance Reports
Budget: quantitative expression of a plan of action
Performance reports: compare actual results with budgeted amounts provide feedback by comparing results with plans highlight variances
Variances: deviations from plans
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Performance Reports
Budget Actual Variance
Sales 50,000 50,000 0
Less:
Ingredients 22,000 24,500 2,500 U
Store labor 12,000 11,600 400 F
Other labor 6,000 6,050 50 U
Utilities, etc. 4,500 4,500 0
Total expenses 44,500 46,650 2,150 U
Operating income 5,500 3,350 2,150 U
U= Unfavorable actual exceeds budget
F Favorable actual is less than budget
Mayfair Starbucks Store, March 31, 20X1
Product Life Cycle
Product life cycle refers to the variousstages through which a product passes.
No Sales Sales Growth Stable Sales Level Low sales No sales
ProductDevelopment
Introductionto Market Mature Market
Phase-outProduct
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Organizational Authority andResponsibility
Line managers:directly involved with
making and sellingproducts or services.
Staff managers: Advisory –Support line managers.
Cross-functional teams: Found inmodern, “flatter” organizations;
Functional areas work togetherin decision-making process.
Accounting Function
Planning for control
Reporting and interpreting
Evaluating and consulting
Tax administration
Government reporting
Protection of assets
Economic appraisal
Treasurer Functions
Provision of capital
Investor relations Short-term financing
Banking and custody
Credits and collections
Investments
Risk management
(insurance)
Controller Functions
Chief Financial Officer (CFO)
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Career Opportunities inManagement Accounting
The Certified Management Accountant (CMA)
CMAs must pass a four-part examination:1. Business Analysis2. Management accounting and reporting3. Strategic Management, and4. Business Applications.
Management AccountingChange Drivers
Shift from a manufacturing-basedto a service-based economy
Increased global competition
Advances in technology
Changes in business processes
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Major Influences on ManagementAccounting
Business process reengineering:Just-in-time (JIT) philosophy
Lean manufacturing
Computer-integrated manufacturingSix sigma
Advances in technology:E-commerce
Enterprise resource planning (ERP)B2C and B2B
Standards of Ethical Conduct
The Institute of Management Accountants (IMA)Statement of Ethical Professional Practice for
Management Accounting MembersRequires members to adhere
to a code of conduct regarding:Competence,Confidentiality,Integrity, andCredibility.
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Ethics
No regulation can be as effectivein ensuring reliability as high
ethical standards of accountants.
IntegrityTrust
Reliability
Ethical Dilemmas
Managers must choose an alternative and there are: Significant value conflicts among differing interests. Real alternatives that are all justifiable, and Significant consequences on stakeholders in the
situation.
8/13/2019 Lecture 1a_Managerial Accounting, The Business Organization, And Professional Ethics
