Presentation on theme: "Managerial Accounting: An Introduction To Concepts, Methods, And Uses"— Presentation transcript:
1 Managerial Accounting: An Introduction To Concepts, Methods, And Uses Chapter 1Fundamental ConceptsMaher, Stickney and Weil
2 Learning Objectives (Slide 1 of 2) Distinguish between managerial and financial accounting.Understand how managers can use accounting information to implement strategies.Identify the key financial players in the organization.Understand managerial accountants’ professional environment and ethical responsibilities.Master the concept of cost.
3 Learning Objectives (Slide 2 of 2) Compare and contrast income statements prepared for managerial use and those prepared for external reporting.Understand the concepts useful for managing costs.Describe how managerial accounting supports modern production environments.Understand the importance of effective communication between accountants and users of managerial accounting information.Understand the ethical standards that comprise the Institute of Management Accountants’ Code of Ethics.
4 Comparison of Financial and Managerial Accounting Financial AccountingDeals with reporting to parties outside the organizationHighly regulatedPrimarily uses historical dataManagerial AccountingDeals with activities inside an organizationUnregulatedMay use projections about the future
5 Implementing Strategies Managerial accounting system should help managers implement organization’s strategySystem must be adapted to each organization’s objectives, strategy and environmentInformation required for decision making, planning, and other managerial activities often is not provided by the financial accounting system
7 Professional Environment (Slide 1 of 2) Institute of Management Accountants (IMA)Sponsors Certified Management Accountant and Certified in Financial Management programsPublishes a journal, policy statements and research studies on accounting issuesCertified Public AccountantCost Accounting Standards BoardSets accounting standards for contracts between the U.S. government and defense contractors
8 Professional Environment (Slide 2 of 2) Ethical issues, while always important, have taken on added significance due to recent accounting failuresThe IMA has developed a Code of Conduct mandating that management accountants have a responsibility to maintain the highest levels of ethical conduct
9 Basis Cost Concepts (Slide 1 of 4) A cost is a sacrifice of resourcesYou must know the context in which the word cost is used to know its meaningOpportunity cost is the foregone income from using an asset in its best alternative
10 Basis Cost Concepts (Slide 2 of 4) A cost is distinguished from an expenseAn outlay of cash may lead to another resource taking its placeThe term expense is reserved for external reporting under GAAP and for income tax reporting
11 Basis Cost Concepts (Slide 3 of 4) A cost object is any item for which the manager wishes to measure costCosts directly related to the cost object are called direct costsOther costs are called indirect costs
12 Basis Cost Concepts (Slide 4 of 4) The distinction between fixed and variable costs is important since it affects strategic decision makingVariable costs change in total as the activity level changesFixed costs do not change in total when the activity level changes
13 Income Statement For External Reporting Sales Revenue $400,000Less Cost of Goods Sold ,000Gross Margin $190,000Less Mktg. and Admin Exp ,000Net Income Before Taxes $110,000
14 Contribution Margin Format Income Statement Sales Revenue $400,000Less Variable Costs:Variable Cost of Sales $160,000Variable Mktg & Admin 8, ,000Contribution Margin $232,000Less Fixed Costs:Fixed Cost of Sales $50,000Fixed Mktg & Admin 72, ,000Net Income Before Taxes $110,000
15 Managing CostsEffective cost control requires managers to understand how producing a product involves activities and how those activities generate costsActivity-based Management studies the need for activities and whether they are operating efficiently
16 Value-Added Activities Value-added activities increase the product’s service to customersManager’s try to eliminate non-value-added activities to reduce costs without reducing the product’s service potential to customersThe value chain describes the linked set of activities that add value to the products or services of the organization
17 Research & Development The Value ChainBegin Value ChainResearch & DevelopmentDesignProductionMarketingDistributionEnd Value Chain
18 Managerial Accounting in Modern Production Environments Key developments that reshaped Managerial Accounting include:Integrated information systemsWeb hostingJust-in-time and lean productionTotal Quality ManagementTheory of constraintsBenchmarking and continuous improvement
19 Dr. Donald R. Trippeer, CPA Colorado State University-Pueblo If you have any comments or suggestions concerning this PowerPoint Presentation for Managerial Accounting, An Introduction To Concepts, Methods, And Uses please contact:Dr. Donald R. Trippeer, CPAColorado State University-Pueblo
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