Introduction to managerial Accounting.ppt
- 2. 1-2 Financial and Managerial Accounting: Seven Key Differences
- 3. 1-3 Organizational Structure Corporate Organization Chart Purchasing Personnel Vice President Operations Treasurer Controller Chief Financial Officer President Board of Directors
- 4. 1-4 Line and Staff Relationships
- 6. 1-6 Planning Establish Goals. Specify How Goals Will Be Achieved. Develop Budgets.
- 7. 1-7 Controlling The control function gathers feedback to ensure that plans are being followed. Feedback in the form of performance reports that compare actual results with the budget are an essential part of the control function.
- 8. 1-8 Decision Making Decision making involves making a selection among competing alternatives. What should we be selling? Who should we be serving? How should we execute?
- 9. 1-9 Why does managerial accounting matter to your career? Business Majors Marketing Supply Chain Management Human Resource
- 10. 1-10 Managerial Accounting Activities: Marketing Majors How many salespeople should we plan to hire to serve a new territory? How much should we budget for TV, print, and internet advertising? Planning
- 11. 1-11 Managerial Accounting Activities: Marketing Majors Are we accumulating too much inventory during the holiday shopping season? Is the budgeted price cut increasing unit sales as expected? Controlling
- 12. 1-12 Managerial Accounting Activities: Marketing Majors Should we sell directly to customers or use a distributor? Should we sell our services as one bundle or sell them separately? Decision Making
- 13. 1-13 Managerial Accounting Activities: Supply Chain Management Majors How much should we budget for next period’s utility expense? How many units should we plan to produce next period? Planning
- 14. 1-14 Managerial Accounting Activities: Supply Chain Management Majors Are we achieving our goal of reducing the number of defective units produced? Did we spend more or less than expected for the units we actually produced? Controlling
- 15. 1-15 Managerial Accounting Activities: Supply Chain Management Majors Should we redesign our manufacturing process to lower inventory levels? Should we buy a new piece of equipment or upgrade our existing machine? Decision Making
- 16. 1-16 Managerial Accounting Activities: Human Resource Management Majors How much should we plan to spend on employee recruitment advertising? How much should we plan to spend for occupational safety training? Planning
- 17. 1-17 Managerial Accounting Activities: Human Resource Management Majors Are we meeting our goal of completing timely performance appraisals? Is our employee retention rate exceeding our goals? Controlling
- 18. 1-18 Managerial Accounting Activities: Human Resource Management Majors Should we hire temporary workers or full-time employees? Should we hire an on-site medical staff to lower our healthcare costs? Decision Making
- 19. 1-19 Accounting Majors Many accounting graduates begin working for public accounting firms. However, most leave at some point to work in other organizations. The IMA estimates that 80% of professional accountants in the U.S. work in non-public accounting environments. 80%
- 20. 1-20 Certified Management Accountant A management accountant who has the necessary qualifications and who passes a rigorous professional exam earns the right to be known as a Certified Management Accountant (CMA).
- 21. 1-21 CMA Exam Information about becoming a CMA and the CMA program can be accessed on the IMA’s website at www.imanet.org or by calling 1-800-638-4427. Part 1 Financial Planning, Performance and Control Planning, budgeting, and forecasting Performance management Cost management Internal controls Professional ethics Part 2 Financial Decision Making Financial statement analysis Corporate finance Decision analysis and risk management Investment decisions Professional ethics
- 22. 1-22 Code of Conduct for Management Accountants
- 23. 1-23 IMA Guidelines for Ethical Behavior
- 24. 1-24 IMA Guidelines for Ethical Behavior
- 25. 1-25 IMA Guidelines for Ethical Behavior
- 26. 1-26 IMA Guidelines for Ethical Behavior
- 27. 1-27 IMA Guidelines for Ethical Behavior
- 28. 1-28 IMA Guidelines for Resolution of an Ethical Conflict • Follow established policies. • For unresolved ethical conflicts: Discuss the conflict with immediate superior or next highest uninvolved manager. Make reference to the Sarbanes-Oxley Act passed by Congress in 2002 in part to give legal protection to those reporting corporate misconduct. If immediate superior is the CEO, consider the board of directors or the audit committee.
- 29. 1-29 IMA Guidelines for Resolution of an Ethical Conflict • Follow established policies. • For unresolved ethical conflicts: Except where legally prescribed, maintain confidentiality. Clarify issues in a confidential discussion with an objective advisor. Consult an attorney as to legal obligations. The last resort is to resign.
- 30. 1-30 Strategic Management Skills A strategy is a “game plan” that enables a company to attract customers by distinguishing itself from competitors. The focal point of a company’s strategy should be its target customers.
- 31. 1-31 Customer Value Propositions Understand and respond to individual customer needs. Customer Intimacy Strategy Operational Excellence Strategy Deliver products and services faster, more conveniently, and at lower prices. Product Leadership Strategy Offer higher quality products.
- 32. 1-32 Enterprise Risk Management A process used A process used by a company to by a company to proactively identify proactively identify and manage risk. and manage risk. Once a company identifies its risks, perhaps the most 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?
- 33. 1-33 Enterprise Risk Management Examples of Controls to Examples of Business Risks Reduce Business Risks ● Products harming customers ● Develop a formal and rigorous new product testing program ● Losing market share due to the ● Develop an approach for legally unforeseen actions of competitors gathering information about competitors' plans and practices ● Poor weather conditions shutting ● Develop contingency plans for down operations overcoming weather-related disruptions ● Website malfunction ● Thoroughly test the website before going "live" on the Internet ● A supplier strike halting the flow ● Establish a relationship with two of raw materials companies capable of providing raw materials ● Financial statements unfairly ● Count the physical inventory on reporting the value of inventory hand to make sure that it agrees with the accounting records ● An employee accessing ● Create password-protected barriers unauthorized information that prohibit employees from obtaining information not needed to do their jobs
- 34. 1-34 Process Management Business functions making up the value chain Business functions making up the value chain Product Customer R&D Design Manufacturing Marketing Distribution Service A business process is a series of steps that are followed in order to carry out some task in a business.
- 35. 1-35 Lean Production Customer places an order Create Production Order Generate component requirements Production begins as parts arrive Goods delivered when needed Components are ordered Lean Production is often called Just-In-Time (JIT) production.
- 36. 1-36 Lean Production Produce goods in anticipation of Sales Make Sales from Finished Goods Inventory Traditional Manufacturing Traditional Manufacturing Store Inventory
- 37. 1-37 Lean Production Because lean thinking only allows production in response to customer orders, the number of units produced tends to equal the number of units sold. The lean approach also results in fewer defects, less wasted effort, and quicker customer response times than traditional production methods.
- 38. 1-38 A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want. The Theory of Constraints (TOC) is based on the observation that effectively managing the constraint is the key to success. The constraint in a system is determined The constraint in a system is determined by the step that has the by the step that has the smallest smallest capacity. Theory of Constraints
- 39. 1-39 4. Recognize that the weakest link is stronger. 1. Identify the weakest link. 2. Allow the weakest link to set the tempo. 3. Focus on improving the weakest link. Only actions that strengthen the weakest link in the “chain” improve the process. Theory of Constraints
- 40. 1-40 Measurement Skills A good manager complements an understanding of strategy, risks, and business processes with data-driven analysis. The key to effective analysis is to understand that the question you are addressing defines what you measure and how you analyze the data.
- 41. 1-41 Measurement Skills What 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.
- 42. 1-42 Measurement Skills Controlling Planning Decision Making The primary purpose of this course is to teach measurement skills that managers use to support planning, controlling, and decision making activities.
- 43. 1-43 Leadership Skills Six Skills of an Effective Leader 1. Technical competence 2. High integrity 3. Understand how to implement organizational change 4. Strong communication skills 5. Capable of motivating and mentoring other people 6. Effectively manage team-based decision processes
- 44. 1-44 Mitigate conflicts of interest and advise others of potential conflicts. Abstain from activities that might discredit the profession. Refrain from conduct that would prejudice carrying out duties ethically. Integrity IMA Guidelines for Ethical Behavior
- 45. 1-45 Corporate Social Responsibility CSR extends beyond legal compliance to 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. Customers Employees Communities Suppliers Stockholders Environmental & Human Rights Advocates
- 46. 1-46 Corporate Social Responsibility Companies should provide customers with: Companies and their suppliers should provide ● Safe, high quality products that are fairly employees with: priced ● Safe and humane working conditions ● Competent, courteous, and rapid delivery ● Non-discriminatory treatment and the of products and services right to organize and file grievances ● Full disclosure of product-related risks ● Fair compensation ● Easy to use information systems for ● Opportunities for training, promotion, shopping and tracking orders and personal development Companies should provide suppliers with: Companies should provide communities with: ● Fair contract terms and prompt payments ● Payment of fair taxes ● Reasonable time to prepare orders ● Honest information about plans such as ● Hassle-free acceptance of timely and plant closings complete deliveries ● Resources that support charities, schools, ● Cooperative rather than unilateral and civic activities actions ● Reasonable access to media sources Companies should provide stockholders with: Companies should provide environmental ● Competent management and human rights advocates with: ● Easy access to complete and accurate ● Greenhouse gas emissions data financial information ● Recycling and resource conservation data ● Full disclosure of enterprise risks ● Child labor transparency ● Honest answers to knowledgeable ● Full disclosure of suppliers located in questions developing countries Examples of Corporate Social Responsibility
Editor's Notes
- #2: What is Managerial Accounting? There are seven key differences between financial accounting and managerial accounting: Users: Financial accounting reports are prepared for external parties, whereas managerial accounting reports are prepared for internal users. Emphasis on the future: Financial accounting summarizes past transactions. Managerial accounting has a strong future orientation. Relevance of data: Financial accounting data should be objective and verifiable. Managerial accountants focus on providing relevant data even if these data are not completely objective and verifiable. Less emphasis on precision: Financial accounting focuses on precision when reporting to external parties. Managerial accounting aids decision makers by providing good estimates as soon as possible rather than waiting for precise data later. Segments of an organization: Financial accounting is concerned with companywide reports. Managerial accounting focuses on the segment reports. Examples of segments include: product lines, sales territories, divisions, departments, etc.. Managerial accounting–no externally imposed rules: Financial accounting conforms to GAAP and IFRS. Managerial accounting is not bound by GAAP and IFRS. Managerial accounting–not mandatory: Financial accounting is mandatory because various outside parties require periodic financial statements. Managerial accounting is not mandatory.
- #5: Managerial accounting helps managers carry out three main activities – planning, controlling, and decision making.
- #6: Planning involves establishing goals and specifying how to achieve them. Plans are often accompanied by a budget. A budget is a detailed plan for the future that is usually expressed in formal quantitative terms.
- #7: Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Part of the control process includes preparing performance reports. A performance report compares budgeted to actual results to improve future performance.
- #8: Decision making involves selecting a course of action from competing alternatives. Many managerial decisions revolve around answering three questions: a. What should we be selling? b. Who should we be serving? c. How should we execute?
- #10: Why does managerial accounting matter to your career? Managerial accounting skills are useful in just about any career, organization, and industry. First, let’s consider business majors, specifically marketing majors. Marketing majors are involved in various planning activities. How much should we budget for TV, print, and internet advertising? How many salespeople should we plan to hire to serve a new territory?
- #11: Marketing majors are also involved in controlling activities. Is the budgeted price cut increasing unit sales as expected? Are we accumulating too much inventory during the holiday shopping season?
- #12: Marketing majors are involved in decision making activities. Should we sell our services as one bundle or sell them separately? Should we sell directly to customers or use a distributor?
- #13: Next, let’s consider another business major, specifically operations management majors. Operations management majors are involved in various planning activities. How many units should we plan to produce next period? How much should we budget for next period’s utility expense?
- #14: Operations management majors are also involved in controlling activities. Did we spend more or less than expected for the units we actually produced? Are we achieving our goal of reducing the number of defective units produced?
- #15: Operations management majors are involved in decision making activities. Should we buy a new piece of equipment or upgrade our existing machine? Should we redesign our manufacturing process to lower inventory levels?
- #16: Now let’s consider human resource management majors. They are involved in various planning activities. How much should we plan to spend for occupational safety training? How much should we plan to spend on employee recruitment advertising?
- #17: Human resource management majors are also involved in controlling activities. Is our employee retention rate exceeding our goals? Are we meeting our goal of completing timely performance appraisals?
- #18: Human resource management majors are involved in decision making activities. Should we hire an on-site medical staff to lower our healthcare costs? Should we hire temporary workers or full-time employees?
- #19: The IMA estimates that more than 80% of professional accountants in the United States work in non-public accounting environments. If you are an accounting major there is a high likelihood that your future will involve working for a non-public accounting employer. This employer will expect you to have strong financial accounting skills, but more importantly, it will expect you to help improve organizational performance by applying the planning, controlling, and decision making skills that are the foundation of managerial accounting.
- #20: For accounting majors, the Certified Management Accountant (CMA) designation is a globally-respected credential that will increase your credibility, upward mobility, and compensation.
- #21: This slide summarizes the topics included in the two-part CMA exam. The CMA focuses on the planning, controlling, and decision making skills that are critically important to non-public accounting employers. It complements the CPA exam, which focuses on rule-based compliance—assurance standards, financial accounting standards, business law, and the tax code. Information about becoming a CMA and the CMA program can be accessed on the IMA’s website at www.imanet.org or by calling 1-800-638-4427.
- #30: A strategy is a “game plan” that enables a company to attract customers by distinguishing itself from competitors.
- #31: Companies that adopt a customer intimacy strategy strive to understand and respond to individual customer needs better than competitors. Examples of companies that pursue this strategy include: Ritz-Carlton, Nordstrom, and Virtuoso. Companies that adopt an operational excellence strategy strive to deliver products and services faster, more conveniently, and at a lower price than competitors. Examples of companies that pursue this strategy include: Southwest Airlines, Wal-Mart, and The Vanguard Group. Companies that adopt a product leadership strategy strive to offer higher quality products than competitors. Examples of companies that pursue this strategy include: Apple, BMW, and Cisco Systems.
- #32: Enterprise risk management is a process used by a company to proactively identify the risks that it faces and manage those risks. Once a company identifies its risks, perhaps the most common risk management tactic is to reduce risks by implementing specific controls.
- #33: This slide contains a subset of the business risks and controls shown in Exhibit 1-5 of the textbook. Collectively, these examples illustrate the diversity of risks that companies can face. In each example, the left hand column provides a potential risk, and the right hand column provides a related control that could help reduce the risk. Although these types of controls cannot completely eliminate risks, they do represent proactive attempts to manage risks.
- #34: A business process is a series of steps that are followed in order to carry out some task in a business. A value chain consists of the major business functions that add value to a company’s products and services.
- #35: Lean production is a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders. Lean production is often called just-in-time (JIT) production because products are only made in response to customer orders and they are completed just-in-time to be shipped to customers.
- #36: Traditional manufacturing methods organize work departmentally and encourage those departments to maximize their output even it exceeds customer demand and bloats inventories.
- #37: Because lean thinking only allows production in response to customer orders, the number of units produced tends to equal the number of units sold. The lean approach also results in fewer defects, less wasted effort, and quicker customer response times than traditional production methods.
- #38: A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want. The constraint in a system is determined by the step that has the smallest capacity. The Theory of Constraints (TOC) is based on the insight that effectively managing the constraint is the key to success. The goal is to manage the constraint with the intent of generating more business rather than cutting the workforce.
- #39: The Theory of Constraints offers a four-step approach to process improvement: Identify the weakest link in the chain, which is the constraint. Do not place a greater strain on the system than the weakest link can handle – if you do, the chain will break. Concentrate improvement efforts on strengthening the weakest link. If the improvement efforts are successful, eventually the weakest link will improve to the point that it is no longer the weakest link. At this point, a new weakest link must be identified and the improvement process starts over again.
- #40: The question you are trying to answer defines what you’ll measure and how you analyze it. Consider the following examples.
- #41: If the question you wish to answer is what net income should my company report to its stockholders, then you’ll be measuring and reporting historical financial data that complies with applicable rules. If you are trying to determine how your company is serving its customers, then you’ll be measuring and analyzing mostly non-financial, process-oriented data. If you want to predict whether your company will need to borrow money, then your measurement efforts will focus on estimating future cash flows.
- #42: The primary purpose of this course is to teach you measurement skills that managers use every day to support their planning, controlling, and decision making activities.
- #43: To be an effective leader, you’ll need to develop six skills: You’ll need technical competence within your area of expertise and with respect to operations outside your functional area of expertise. You must be a person of high integrity. You’ll need to understand how to implement organizational change. You’ll need strong communication skills. You’ll need to be capable of motivating and mentoring other people. You’ll need to effectively manage team-based decision processes.
- #44: The third area is integrity. Management accountants must: Mitigate conflicts of interest and advise others of potential conflicts. Refrain from conduct that would prejudice carrying out duties ethically. Abstain from activities that might discredit the profession.
- #45: Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations. Stakeholders include groups, such as customers, employees, suppliers, communities, stockholders, and environmental and human rights advocates, whose interests are tied to the company’s performance.
- #46: This slide presents examples of corporate social responsibilities that are of interest to the six stakeholder groups just mentioned. Many companies are paying increasing attention to these types of broadly defined responsibilities.