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Chapter 1 Introduction to Management Accounting
Managerial Accounting, the Business Organization, and Professional Ethics
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Users of Accounting Information Internal managers Creditors: Suppliers Bankers Day-to-day operating decisions
Long-range strategic decisions Management Accounting Financial Accounting External Users Investors: Stockholders Government Authorities Learning
Objective 1 |
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Scorekeeping: Evaluate Organizational Performance Attention Directing: Compare Actual Results to Expected Problem Solving: Assess Possible Courses of Action Decision Making |
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Process of gathering, organizing, and
Communicating financial information Financial Statements Accounting Information System |
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Influences on Accounting Systems Generally accepted accounting principles (GAAP) Foreign Corrupt Practices Act Internal controls Management audits Sarbanes-Oxley Act Internal auditors |
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Sarbanes-Oxley Act In 2002, the Sarbanes-Oxley Act required
chief executive officers to sign a
statement verifying the accuracy of
the company’s financial statements. External auditors must examine and report
on the company’s internal control system. Learning
Objective 2 |
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Ethics No regulation can be as effective in
ensuring reliability as high ethical
standards of accountants. Integrity Trust Reliability |
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Service and Nonprofit Organizations Service
organizations Nonprofit
organizations Accounting firms
Law firms
Real estate firms
Banks
Hotels Hospitals
Schools
Libraries
Museums
Government agencies |
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Cost-Benefit and Behavioral Considerations Cost-benefit
balance Behavioral
implications Weigh estimated
costs against
probable benefits. The system must provide
accurate, timely budgets and
performance reports in a form
useful to managers. Managers must use accounting
reports, or the reports
create no benefits. Learning
Objective 3 |
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Decision Making Decision making: the purposeful choice
from among a set of alternative courses
of action designed to achieve some objective. Planning: Setting objectives and outlining how the objectives will be obtained. Control: Implementing plans and using feedback to evaluate the attainment of objectives. |
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The Nature of Planning and Controlling Planning
Increase
Profitability Control
– Actions
– Evaluations Corrections and revisions of plans and actions Budgets,
Special
Reports Accounting
System Performance
Reports Customer
surveys Competitor
analysis Advertising
impact New items
report Internal Accounting System Management Process Other information systems Learning
Objective 4 |
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Budget and Performance Reports Budget: quantitative expression of a plan of action Performance reports:
compare actual results with budgeted amounts
provide feedback by comparing results with plans
highlight variances Variances: deviations from plans |
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Performance Reports Budget Actual Variance
Sales $50,000 $50,000 0
Less:
Ingredients 22,000 24,500 $2,500 U
Store labor 12,000 11,600 400 F
Other labor 6,000 6,050 50 U
Utilities, etc. 4,500 4,500 0
Total expenses $44,500 $46,650 $2,150 U
Operating income $ 5,500 $ 3,350 $2,150 U
U= Unfavorable – actual exceeds budget
F – Favorable – actual is less than budget. Mayfair Starbucks Store, March 31, 20X7 |
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Product Life Cycle Product life cycle refers to the various
stages through which a product passes. No Sales
Product
Development Sales Growth
Introduction to Market Stable Sales Level
Mature Market Low sales ? No sales
Phase-out
Product |
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The Value Chain Customer
Focus Research
and
Development Product
And
Service
Process
Design Production Marketing Distribution Service |
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Management Accountant’s Role as Internal Consultant Prepares
standardized
reports Collects
and compiles
information Interprets and
Analyzes information Is Involved
In decision making Internal
Consultant Management Learning
Objective 5 |
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Organizational Authority and Responsibility Line managers:
directly involved with
making and selling
products or services. Staff managers: Advisory –
Support line managers. Cross-functional teams: Found in
modern, “flatter” organizations;
Functional areas work together
In decision making process. |
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Accounting Function Planning for control
Reporting and interpreting
Evaluating and consulting
Tax administration
Government reporting
Protection of assets
Economic appraisal Treasurer Functions Provision of capital
Investor relations
Short-term financing
Banking and custody
Credits and collections
Investments
Risk management (insurance) Controller Functions Chief Financial Officer (CFO) Learning
Objective 6 |
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Career Opportunities in Management Accounting The Certified Management Accountant (CMA) CMAs must pass a four-part examination:
Business Analysis
Management accounting and reporting
Strategic Management, and
4. Business Applications.
Learning
Objective 7 |
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Management Accounting Change Drivers Shift from a manufacturing-based
to a service-based economy Increased global competition Advances in technology Changes in business processes Learning
Objective 8 |
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Major Influences on Management Accounting Business process reengineering:
Just-in-time (JIT) philosophy
Lean manufacturing
Computer-integrated manufacturing
Six sigma Advances in technology:
E-commerce
Enterprise resource planning (ERP) |
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Standards of Ethical Conduct The Institute of Management Accountants (IMA)
Statement of Ethical Professional Practice for
Management Accounting Members
Requires members to adhere
to a code of conduct regarding:
Competence,
Confidentiality,
Integrity, and
Credibility. Learning
Objective 9 |
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Ethical Dilemmas Managers must choose an alternative and there are:
Significant value conflicts among differing interests.
Real alternatives that are all justifiable, and
Significant consequences on stakeholders in the situation. |
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Unethical Behavior Temptations Accounting rules
Avoid creative interpretations of the rules.
Practice full and fair disclosure to convey company’s performance. Emphasis on short-term results:
Pressure to meet expected profit numbers. Ignoring the small stuff:
Large misdeeds often result from many small ones. Economic cycles:
A downturn market can reveal what an upturn market conceals.
Vigilance in all stages of economic markets maintains high ethical standards. |
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The End End of Chapter 1 |
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