Download MANAGERIAL ACCOUNTING: Definition

STUDENT
CHAPTER 1
MANAGERIAL
ACCOUNTING
PowerPoint Presentation by
Gail B. Wright
Professor Emeritus of Accounting
Bryant University
© Copyright 2008 Thomson South-Western, a part of
The Thomson Corporation. Thomson, the Star Logo,
and South-Western are trademarks used herein under
license.
10TH EDITION
BY
MAHER, STICKNEY & WEIL
OVERVIEW & BASIC CONCEPTS
1
Overview & Basic Concepts
LEARNING OBJECTIVES
1. Distinguish between managerial, financial
accounting.
2. Understand how managers use accounting
information to implement strategies.
3. Identify key financial players in the organization.
4. Understand managerial accounts’ professional
environment & ethical responsibilities.
5. Master concept of cost.
Continued
2
Overview & Basic Concepts
LEARNING OBJECTIVES
6. Compare, contrast income statements for
managerial use & external reporting.
7. Understand concepts useful for managing costs.
8. Describe how managerial accounting supports
modern production environments.
9. Understand importance of effective
communication between accountants & users of
managerial accounting information.
10. Understand ethical standards that make up IMA
code of Ethics (Appendix 1.1).
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LO 1
MANAGERIAL APPLICATION
Overview & Basic Concepts
How did cost
information help
Domino’s Pizza
survive?
Domino’s dropped its 6-inch
pizza when they discovered it
was losing money.
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LO 1
FINANCIAL ACCOUNTING:
Definition
Overview & Basic Concepts
Reports to users
(shareholders, creditors,
financial analysts, etc.)
outside the organization.
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LO 1
MANAGERIAL ACCOUNTING:
Definition
Overview & Basic Concepts
Reports results of activities
to insiders (managers, etc.).
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LO 2
Overview & Basic Concepts
When a product is a
“commodity” how do you
compete to achieve/maintain
profitability?
Compete by differentiating
yourself from competition. Focus
on order fulfillment, cutting
costs, etc.
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LO 2
Overview & Basic Concepts
Can/should the financial or tax
accounting systems be used for
managerial accounting
purposes?
NO! The objectives and
therefore the information
available for decision making is
different.
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LO 3
Overview & Basic Concepts
Who are the key
financial players in the
corporation?
Key financial players are
Financial Vice President,
Controller, Treasurer, Cost
Accountants/Managers, &
Internal Audit.
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LO 3
Overview & Basic Concepts
FINANCIAL PROFESSIONALS
Financial VP: in charge of all accounting &
finance
 Controller: manages cost & managerial
accounting
Treasurer: manages cash flows; raises cash
Cost accountants/managers: analyze, manage
costs
Internal audit: provides auditing, consulting
services
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LO 4
ETHICAL, REGULATORY
FRAMEWORK
Standard setting
Cost Accounting Standards Board sets cost accounting
standards
 Professional organizations
Institute of Management Accounts (IMA) sponsors
professional certifications
Overview & Basic Concepts
Certifications
Certified Management Accountant (CMA)
Certified Public Accountant (CPA)
Canadian certifications
Chartered Accountant (CA)
Certified General Accountant (CGA)
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LO 4
What should the
accounting professional do
in cases of conflict?
Overview & Basic Concepts
1. Follow company procedures.
2. If not resolved, discuss with
superiors.
3. In extreme cases, resign.
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LO 5
COST: Definition
Overview & Basic Concepts
Is a sacrifice of resources.
13
LO 5
TYPES OF COSTS
Opportunity costs
Is the forgone income from using an asset in its best
alternative
Direct costs
Relate directly to the cost object for which cost is to be
measured
Indirect costs
Overview & Basic Concepts
Are indirectly related to the cost of a cost object
Variable costs
Change in total as the level of activity changes
Fixed costs
Do not change in total with changes in the level of activity
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LO 6
Overview & Basic Concepts
How do financial and
managerial income
statements differ?
Managerial income statements
present variable and fixed
costs separately while
financial income statements do
not make this distinction.
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LO 7
Overview & Basic Concepts
ACTIVITY BASED
MANAGEMENT (ABM): Definition
Examines activities and their
associated costs as a means of
developing efficiencies and
reducing non-value-added
costs.
16
LO 7
Overview & Basic Concepts
What are “non-valueadded” activities?
Non-value-added activities are
activities that can be
eliminated without reducing a
product’s service potential to
the customer.
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LO 7
Overview & Basic Concepts
VALUE CHAIN: Definition
Describes a linked set of
activities that increase the
usefulness (value) of
products/services of an
organization.
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LO 7
Overview & Basic Concepts
How do strategic and
tactical cost management
decisions differ?
Strategic decisions choose
between production
alternatives. Tactical decisions
make a particular production
alternative more cost efficient.
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LO 7
STRATEGY & VALUE CHAIN
Overview & Basic Concepts
Strategic cost analysis identifies parts
of the value chain that generate
most profits, enabling management
to position their business at the best
profit points.
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LO 7
ECONOMIC DEPRECIATION:
Overview & Basic Concepts
Definition
Measures decline in value
of assets during a period
using either sales value or
replacement cost.
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LO 7
Overview & Basic Concepts
COST OF CAPITAL: Definition
Is the amount a firm could
earn on its assets by
putting them to their best
alternative use.
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LO 9
INFORMATION
Overview & Basic Concepts
Information is not free. Management
must consider costs & benefits of
information when designing an
optimal accounting system.
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Overview & Basic Concepts
CHAPTER 1
THE END
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