3Financial Accounting Versus Management Accounting OBJECTIVE1Financial accounting is devoted to providing information for external users; these users include investors, government agencies, and banks.Cost management identifies, collects, measures, classifies, and reports information that is useful to managers in costing (determining what something costs), planning, controlling, and decision making.
4Financial Accounting Versus Management Accounting OBJECTIVE1Cost accounting attempts to satisfy costing objectives for both financial and management accounting.Management accounting is concerned specifically with how cost information and other financial and nonfinancial information should be used for planning, controlling, and decision making.
5Factors Affecting Cost Management OBJECTIVE2Global CompetitionThe new competitive environment has increased the demand not only for more cost information but also for more accurate information.Vastly imported transportation and communication has led to a global market for many manufacturing and service firms.
6Factors Affecting Cost Management OBJECTIVE2Growth of the Service IndustryAs the traditional industries has declined in importance, the service sector of the economy has increased in importance.Deregulation of many services has increased competition in the service industry.
7Factors Affecting Cost Management OBJECTIVE2Advances in Information TechnologyComputers are used to monitor and control operations. The result is an operational system that is fully integrated with marketing and accounting data.Increased ability to accurately cost products because of advances in tools.Emergence of e-commerceInternet tradingElectronic data interchangeBar coding
8Factors Affecting Cost Management OBJECTIVE2Advances in Management EnvironmentThe theory of constraints is a method used to continuously improve manufacturing activities and nonmanufacturing activities.Just-in-time manufacturing is a demand-pull system that strives to produce a product only when it is needed and only in the quantities demanded by customers.Computer-integrated manufacturing is the automation of the manufacturing environment.
9Factors Affecting Cost Management OBJECTIVE2Customer OrientationFirms are competing not only in terms of technology and manufacturing, but in the speed of delivery and response to deliver value to the customer.Companies must also satisfy the needs of internal customers, such as staff functions exist to support line functions.
10Factors Affecting Cost Management OBJECTIVE2New Product DevelopmentManagement recognizes that a high proportion of production costs are committed during the development and design stage of a new product.The requirement to control cost encourages the use of target costing and activity-based management.
11Factors Affecting Cost Management OBJECTIVE2Total Quality ManagementContinual improvement and elimination of waste are the two foundation principles that govern a state of manufacturing excellence.A philosophy of total quality management, in which managers strive to create an environment that will enable organizations to manufacture perfect products, has replaced the acceptable quality attitudes of the past.
12Factors Affecting Cost Management OBJECTIVE2Time as a Competitive ElementTime is the crucial element in all phases of the value chain.Decreasing non-value-added time appears to go hand-in-hand with increasing quality.
13Factors Affecting Cost Management OBJECTIVE2EfficiencyWhile quality and time are important, improving these dimensions without corresponding improvements in financial performance may be futile, if not fatal.
14Traditional Accounting System OBJECTIVE3TransactionsJournal EntriesPosting to AccountsFinancial Reports
15Data-Based Relationship Accounting System OBJECTIVE3TransactionsCustom ReportCustom ReportCustom ReportCustom Report
16Cost Management: A Cross-Functional Perspective OBJECTIVE4Product costing must take into account costs associated with other functions, such as marketing, management and logistics.A cost management system must be flexible enough to provide the appropriate cost for the circumstance.Today’s accountant must be an expert at valuing methods ofCosting and achieving qualityDifferentiating between value-added and non-value-added activitiesMeasuring and accounting for productivity
17The Role of Today’s Cost and Management Accountant OBJECTIVE5Line positions are positions that have direct responsibility for the basic objectives of an organization.Staff positions are positions that are supportive in nature and have only indirect responsibility for an organization’s basic objectives.
18The Role of Today’s Cost and Management Accountant OBJECTIVE5
19The Role of Today’s Cost and Management Accountant OBJECTIVE5The ControllerFinancial reportsSEC reportingTax planning and reportingPerformance reportingInternal auditingBudgetingAccounting systems and internal controls
20The Role of Today’s Cost and Management Accountant OBJECTIVE5The TreasurerCollection of cashMonitoring of cash paymentsMonitors cash availabilityShort-term investmentsShort and long-term borrowingIssuing of capital stock
21The Role of Today’s Cost and Management Accountant OBJECTIVE5Planning is the detailed formulation of future actions to achieve a particular end. Planning requires setting objectives and identifying methods to achieve those objectives.
22The Role of Today’s Cost and Management Accountant OBJECTIVE5Controlling is the managerial activity of monitoring a plan’s implementation and taking corrective action as needed.Feedback is information that can be used to evaluate or correct the steps being taken to implement a plan.
23The Role of Today’s Cost and Management Accountant OBJECTIVE5Continuous improvement is required in a dynamic environment if a firm is to remain competitive or to establish a competitive advantage.
24The Role of Today’s Cost and Management Accountant OBJECTIVE5Decision making is the process of choosing among competing alternatives.
25Accounting and Ethical Conduct OBJECTIVE6Benefits of Ethical BehaviorCan create customer and employee loyaltyAvoid litigation costsStandards of Ethical Conduct for Management AccountantsCompetenceConfidentialityIntegrityObjectivity
26CertificationOBJECTIVE7CMA: One of the main purposes of the CMA was to establish management accounting as a recognized, professional discipline, separate from the profession of public accounting.CPA: The responsibility of a CPA is to provide assurance concerning the reliability of financial statements.CIA: The focus of the CIA is to recognize competency in internal auditing rather than external auditing as with the CPA.
27Certification 7 Four areas emphasized on the CMA exam: OBJECTIVE7Four areas emphasized on the CMA exam:Economics, finance, and managementFinancial accounting and reportingManagement report, analysis, and behavioral issuesDecision analysis and information systems