Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems 1-1 Lecture 1 Introduction to Managerial Accounting

Reference Book Managerial Accounting, Ronald W Hilton, 8th Edition, McGraw-Hill 2

Assessment Performance will be evaluated according to following criteria: Regular attendance is a prerequisite for passing the course. Continuous Quizzes and Assignments (20%) Mid year Exam (20%) Final written exam (60%) 3

objectives of this course This course emphasizes the use of accounting information for internal planning and control purposes. The course is intended as an introduction for individuals who make business decisions and evaluate the performance of business units using data obtained from the accounting system. The course covers the vocabulary and mechanics of cost accounting, basic issues involved in the design of a cost accounting system, and the role of management accounting in decisions concerning resource allocation and performance evaluation. 4

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Managerial accounting is the process of Identifying Measuring Analyzing Interpreting Communicating information Define Managerial Accounting

7 The process of identifying, measuring, analyzing, interpreting, and communicating information for the pursuit of an organization's goals. The key difference between managerial and financial accounting is that managerial accounting information is aimed at helping managers within the organization make decisions. In contrast, financial accounting is aimed at providing information to parties outside the organization.

Managing Resources, Activities, and People An organization... Acquires Resources Hires People Organized set of activities Organized set of activities Decision Making Decision Making Planning Directing Controlling

How Managerial Accounting Adds Value to the Organization Providing information for decision making and planning. Assisting managers in directing and controlling activities. Motivating managers and other employees towards organization’s goals. Measuring performance of activities, managers, and other employees. Assessing the organization’s competitive position. Providing information for decision making and planning. Assisting managers in directing and controlling activities. Motivating managers and other employees towards organization’s goals. Measuring performance of activities, managers, and other employees. Assessing the organization’s competitive position.

Financial and Managerial Accounting: Differences

Work of Management Planning Decision Making Decision Making Controlling

Planning Establish Goals. Specify How Goals Will Be Achieved. Specify How Goals Will Be Achieved. Develop Budgets.

Controlling The control function gathers feedback to ensure that plans are being followed. 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.

Decision Making Decision making involves making a selection among competing alternatives. Decision making involves making a selection among competing alternatives. What should we be selling? What should we be selling? Who should we be serving? Who should we be serving? How should we execute? How should we execute?

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). 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).

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.

Enterprise Risk Management A process used by a company to proactively identify 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?

Process Management 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.

Just-In-Time (JIT) production Customer places an order Create Production Order Generate component requirements Production begins as parts arrive Goods delivered when needed Components are ordered

Measurement Skills A good manager compliments 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.

Measurement Skills Controlling Planning Decision Making Decision Making The primary purpose of this course is to teach measurement skills that managers use to support planning, controlling, and decision making activities.

Controller The chief managerial and financial accountant responsibility for: Supervising accounting personnel Preparation of information and reports, managerial and financial Analysis of accounting information Planning and decision making The chief managerial and financial accountant responsibility for: Supervising accounting personnel Preparation of information and reports, managerial and financial Analysis of accounting information Planning and decision making

Treasurer Responsible for raising capital and safeguarding the organization’s assets. Supervises relationships with financial institutions. Work with investors and potential investors. Manages investments. Establishes credit policies. Manages insurance coverage Responsible for raising capital and safeguarding the organization’s assets. Supervises relationships with financial institutions. Work with investors and potential investors. Manages investments. Establishes credit policies. Manages insurance coverage

Internal Auditor Responsible for reviewing accounting procedures, records, and reports in both the controller’s and the treasurer’s area of responsibility. Expresses an opinion to top management regarding the effectiveness of the organizations accounting system. Responsible for reviewing accounting procedures, records, and reports in both the controller’s and the treasurer’s area of responsibility. Expresses an opinion to top management regarding the effectiveness of the organizations accounting system.

Major Themes in Managerial Accounting ManagerialAccounting Information and Incentives Information and Incentives Costs and Benefits Costs and Benefits Evolution and Adaptation Evolution and Adaptation Behavioral Issues Behavioral Issues

Objectives Ê Measure the cost of resources consumed. Ë Identify and eliminate non- value-added costs. ¸ Determine efficiency and effectiveness of major activities. ¹ Identify and evaluate new activities that can improve performance. Objectives Ê Measure the cost of resources consumed. Ë Identify and eliminate non- value-added costs. ¸ Determine efficiency and effectiveness of major activities. ¹ Identify and evaluate new activities that can improve performance. Cost Management Systems Cost Management System

ProductDesignProductDesign ResearchandDevelopmentResearchandDevelopment Strategic Cost Management and the Value Chain Securing raw materials and other resources Securing raw materials and other resources ProductionProduction Marketing DistributionDistribution Customer Service Customer Service Start

Managerial Accounting as a Career Professional Organizations Institute of Management Accountants (IMA) Publishes Management Accounting and research. studies. Publishes Management Accounting and research. studies. Administers Certified Management Accountant program Administers Certified Management Accountant program Develops Standards of Ethical Conduct for Management Accountants Develops Standards of Ethical Conduct for Management Accountants

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