1 INTRODUCTION Overview of Managerial Accounting Accounting Principles II AC Fall Semester, 1999

2 KEY CONCEPTS & IDEAS The basic purposes of management accounting The differences between management accounting and financial accounting The role of management accounting in an organization The emerging themes of management accounting The importance of ethical considerations and behavior

3 PURPOSES OF MANAGEMENT ACCOUNTING Provide information to assist management in four basic tasks: 1. Costing out products, services, and other items and activities of interest 2. Planning and controlling operations 3. Evaluating the performances of individual managers and different operational units 4. Making decisions

4 CONTEMPORARY MANAGEMENT ACCOUNTING INFORMATION SYSTEMS Increased accuracy in assigning and determining costs Much greater emphasis on tracking nonfinancial data and highlighting its relationship to financial results Explicitly attempts to measure changes in performance (improvement) over time More attuned to providing information for employee empowerment

5 Mgt. Acct. Vs. Fin. Acct. Management Acct. Internally Focused Not constrained by mandatory rules Provides both finan. & nonfinan. information Emphasis on future Detailed information on individual units Financial Acct. Externally focused Must follow GAAP & other external rules Objective financial information Historical Orientation Information on the whole firm

6 Factors Bringing About Change in Management Accounting Customer orientation Cross-functional perspective Global competition Total Quality Management Time as a competitive element Advances in information technology Advances in the manufacturing environ. Growth and dereg. in the service industry Activity-based management

7 Total Quality Management Where manufacturers strive to create an environment that will enable workers to manufacture perfect (zero-defect) products This approach is replacing the “acceptable quality” attitudes of the past This increased emphasis on quality has created a need for additional financial and nonfinancial information about quality

8 Time As A Competitive Element Time is a crucial element in all phases of the value chain World-class firms reduce time to market by compressing design, implementation, and production cycles Quick delivery is accomplished by eliminating (or reducing) non-value added activities Information on the correlation between cost and time is also now needed by the firm

9 Management Accountants’ Role Management accountants are generally in staff positions Their positions are usually supportive and participatory in nature They are not responsible for making operating decisions, and thus only have indirect responsibility for achieving the organization’s basic and targeted objectives They assist marketing, manufacturing, service and financial managers in their decision making

10 The Controller Chief accounting officer Supervises all accounting units Often viewed as a member of top management team Often participates in planning, control and decision-making activities Has responsibilities for both external and internal accounting requirements

11 Management Accounting & Ethical Behavior Profit maximization should be achieved through legal and ethical means Ethical behavior involves choosing actions that are “right,” and “proper,” and “just” Underlying principle is the belief that each member of the group bears some responsibility for the well-being of other members Willingness to sacrifice one’s self-interest for the group is the heart of ethical action

12 Ten Core Values Underlying Ethical Behavior Principles Honesty Integrity Promise keeping Fidelity Fairness Caring for others Respect for others Responsible citizenship Pursuit of excellence Accountability

13 Standards of Ethical Conduct for Management Accountants The standards are specified within the following categories: I. Competence II. Confidentiality III. Integrity IV. Objectivity V. Resolution of Ethical Conflict

14 Certification of Professional Competence for Mgt. Accountants Numerous forms of certification available to management accountants These certifications offer evidence that the holder has achieved a minimum level of professional competence Three major certification programs: –The CMA (Certified Management Accountant) –The CPA (Certified Public Accountant) –The CIA (Certified Internal Auditor)

15 Before You Begin Reading & Studying A Chapter’s Content Carefully read the learning objectives at the start of the chapter Quickly “flip through” the pages of the chapter and note the titles and sub-titles of each section Read the questions at the end of the chapter Read the summary of the learning objectives at the end of the chapter Expect to read the chapter more than once