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Slide 1: Cornerstones of Managerial Accounting Chapter One Introduction to Managerial Accounting Mowen/Hansen Copyright © 2008 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. 1
Slide 2: Management Accounting • • Internal accounting system Designed to support the information needs of managers 2
Slide 3: Management Accounting Generally Accepted Accounting Principles Management Accounting is not bound by GAAP (Generally Accepted Accounting Principles) 3
Slide 4: Three broad objectives Objective 1 To provide information for costing out… Services Products Other objects of interest to management 4
Slide 5: Three broad objectives Objective 2 To provide information for… Planning Continuous Improvement Controlling Evaluation 5
Slide 6: Three broad objectives Objective 3 To provide information for… Decision Making 6
Slide 7: Differences in Targeted Users Financial Accounting Management Accounting Focuses on the external user Focuses on the internal user 7
Slide 8: Differences in Restrictions Financial Accounting Management Accounting Must follow GAAP No guidelines that it must follow 8
Slide 9: Differences in Types of Information Financial Accounting Management Accounting Produces objective and verifiable financial information May be financial or nonfinancial. Much more subjective 9
Slide 10: Differences in Time Orientation Financial Accounting Management Accounting Reports on events that have already happened Includes historical, but focuses on future events 10
Slide 11: Differences in Degree of Aggregation Financial Accounting Management Accounting Focuses on overall firm performance (a more aggregated viewpoint). Focuses on performance of… entities, product lines, departments and managers 11
Slide 12: Accounting System Needs to be flexible enough to provide both financial and managerial accounting information 12
Slide 13: Current Focus Developments in technology, transportation and communication have created the need for better information 13
Slide 14: Activity-Based Costing • • A more detailed approach to determining the cost of goods and services Emphasizes cost of many activities or tasks that must be done to produce a product Objective: Find ways to perform necessary activities more efficiently and eliminate those that do not create customer value. 14
Slide 15: Customer Orientation Advantage comes when company can create better customer value Customer Value What Customer Receives What Customer Gives Up = - 15
Slide 16: Increasing Customer Value Two strategies: Superior Products through differentiation Both strategies require an understanding of the firm’s…. Value Chain 16 Cost Leadership
Slide 17: Cross-Functional Perspective • Management accountant must understand many functions of the business to manage the value chain A decision affecting one function affects the others This perspective allows management to see the big picture and… ◦ Increase quality, reduce time, and improve efficiency • • 17
Slide 18: Total Quality Management • • • “Acceptable quality” attitude is unacceptable A philosophy of perfect products (zero defects) Management accounting must provide both financial and nonfinancial information about quality Continuous improvement is fundamental • 18
Slide 19: Time as a Competitive Element • • • Time is crucial in all phases of the Value Chain Companies try to eliminate “non-valueadded” time Managers must be able to respond quickly and decisively to changing market conditions 19
Slide 20: Efficiency • • • ◦ ◦ ◦ Both financial and nonfinancial measures are needed Cost is a critical measure of efficiency To be effective, cost must be properly Defined Measured Assigned 20
Slide 21: Ethical Conduct Choosing actions that are right, proper and just 1.Honesty 2.Integrity 3. Promise keeping 4. Fidelity 5. Fairness 6. Caring for others 7. Respect for others 8. Responsible citizenship 9. Pursuit of excellence 10. Accountability 21 10 Core Values
Slide 22: Certified Management Accountant (CMA) • • • Certification available to management accountants Establish management accounting as a recognized professional discipline Candidates must: – Pass an examination which underscoring the multidisciplinary nature of management accounting 22
Slide 23: Certified Management Accountant (CMA) Candidates must: • Pass an examination reflecting the needs of management accounting and underscoring its interdisciplinary flavor • Meet an experience requirement • Participate in continuing education • Have a commitment to ethical principles 23
Slide 24: Certified Public Accountant (CPA) • • ◦ Another certification available to management accountants Purpose of the CPA certificate Provides minimal professional qualifications for external auditors • • • Candidates must: Pass an examination Be licensed in the state in which they practice 24
Slide 25: Certified Internal Auditor (CIA) • • • • Created in 1974 Candidates must: Pass an examination Have two years experience 25