1. Chapter 1

2. Introduction to Managerial Accounting
So far – financial accounting
For whom are financial accounting reports prepared primarily?
Managerial – internal users.

3. Definition of Managerial Accounting
A field of accounting that provides economic and financial information for managers and other internal users.
Also called Management Accounting

4. The activities of managerial accounting

5. Managerial Accounting Activities
Explain manufacturing and non manufacturing costs and how they are reported
Compute cost of providing a service or manufacturing a product.
Determine behavior of costs and expenses as activity changes.

6. Assist management in profit planning and formalizing these plans in the form of budgets.
Help to control costs by comparing actual results with planned objectives and standard costs.
Accumulate and present data for making decisions.

7. Distinguishing Features of Managerial Accounting

8. Applies to all types of business
(Service, Merchandising, and Manufacturing)
Applies to all forms of businesses
(Proprietorships, Partnerships, and Corporations)
Applies to not-for-profit and profit oriented companies

9. More responsible for strategic cost management
Teams with people from production, marketing, engineering, etc.
Aid in making critical decisions

10. Distinguish between financial accounting management accounting.
and
management accounting.

11. Comparing Managerial and Financial Accounting
Similarities
Differences

12. Similarities Both deal with economic events of a business
( interests overlap)
Both require that economic events be quantified and communicated to interested parties
Determining unit cost is part of managerial accounting,
Reporting cost of goods manufactured is a part of financial accounting

13. Differences

14. Primary Users Financial Management Investors
Creditors
Government authorities
Management
Internal managers of the business

15. Purpose of Information
Financial
Help investors, creditors, and others make investment, credit, and other decisions
Management
Help managers plan and control business operations

16. Focus and Time Dimension
Financial
Reliability, objectivity, and focus on the past
Management
Relevance

17. Type of Report Management Financial
Internal reports not restricted by GAAP; determined by cost-benefit analysis
Financial
Financial statements restricted by GAAP
Cost benefit analysis Weighing costs against benefits
But must always consider qualitative factors as well

18. Verification Financial Management Annual independent audit by CPAs
No independent audit

19. Scope of Information Management Financial
Detailed reports on parts of the company
Financial
Summary reports primarily on the company as a whole

20. Behavioral Implications
Management
Concern about how reports will affect employees behavior
Financial
Concern about adequacy of disclosure

21. Management Functions
Management’s activities and responsibilities can be classified into the following three broad functions:
Planning
Directing
Controlling

22. Planning Look ahead and establish objectives such as
Maximize short-term profit
Commit to environmental protection
Key Objective: Add value to the business
Value measured by trading price of stock
and by potential selling price of the company

23. Directing Coordinate diverse activities and human resources
Implement planned objectives
Provide incentives to motivate employees
Hire and train employees including executives, managers, and supervisors
Produce smooth-running operation

24. Controlling Keep activities on track Determine whether goals are met
Decide changes needed to get back on track
May use an informal or formal system of evaluations

25. Good decision making is the outcome of good judgment in planning, directing, and controlling.

26. Planning and Control Cycle

27. Begin Decision Making Formulating Long-and Short-Term Plans (Planning)
Implementing the Plans (Directing and Motivating)
Begin
Decision Making
Comparing Actual to Planned Performance (Controlling)
Measuring Performance (Controlling)

28. Questions

29. True/False Questions
1. Although financial and managerial accounting differ in many ways, they are similar in that both rely on the same underlying financial data.

30. Answer: True

36. Thank you