Week 1 - Introduction to Management Accounting

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Week 1 - Introduction to Management Accounting

• strategy
• information technology
• chapter 1

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Balanced Scorecard

• Financial Perspective
• Goals Measures
• Customer Perspective Internal Process
  Perspective
• Goals Measures Goals Measures
• Growth and Learning Perspective
• Goals Measures

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Traditional Architecture
Inventory Management
Billing
Finance
Order Entry
Accounts Receivable
Interface
Interface
Interface
Interface
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Enterprise Resource Planning
Inventory Management
Billing
Finance
Order Entry
Accounts Receivable
Implementing SAP greatly reduces the number of
interfaces and reconciliations
Audit Reconciliation
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Chapter OneIntroduction The Role, History, and
Direction of ManagementAccounting
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Learning Objectives

• Explain the need for management accounting
  information.
• Explain the differences between management
  accounting and financial accounting.
• Provide a brief historical description of
  management accounting.
• Identify and explain the emerging themes of
  management accounting.
• Describe the role of management accountants in an
  organization.

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Learning Objectives (continued)

• Explain the importance of ethical behavior for
  managers and management accountants.
• Identify the three forms of certification
  available to management accountants.

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Management Accounting Information Systems
Special Reports Product Costs
Customer Costs Performance
Reports Personal Communication
Collecting Measuring Storing Analyzing
Reporting Managing
Economic Events
Inputs
Processes
Outputs
Users
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Accounting Information Needs of Managers

• Managers need accounting information and need to
  know how to use it.
• Accounting information can help managers identify
  problems, solve problems, and evaluate
  performance.
• Accounting information is used in all
  organizations manufacturing, merchandising, and
  service.

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Conceptual Framework of Management Accounting

• Cost Accounting Systems (Part I of Text)
• Managerial Decision Making (Part II of Text)
• Planning Control Systems (Part III of Text)

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Conceptual Framework of Management Accounting
(contd)

• Cost Accounting Systems (Part I of Text)
• Know your costs
• The how to of cost accumulation allocation

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Conceptual Framework of Management Accounting
(contd)

• Managerial Decision Making (Part II of Text)
• What difference will it make when a choice is
  to be made between alternative courses of action?
• We assume economically-rational organizations and
  de-emphasize the role of individual
  decision-makers

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Conceptual Framework of Management Accounting
(contd)

• Planning Control Systems (Part III of Text)
• Focus on how organizations run by delegation
  accountability
• Information asymmetry (subordinate knows what
  superior does not know) results in problems of
  harmony of objectives. We assume economically
  rational decision makers who have their own goals
  within the organization

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Financial and Management Accounting
Management Accounting
Financial Accounting
Accounting Information System
1. Internal focus 2. Limited rules 3. Future
oriented 4. Internal evaluation 5. Detailed
information about segments 6. Broad, covers
many many disciplines
1. External focus 2. Rigid rules 3. Historical
focus 4. External evaluation 5. Information about
the whole firm 6. More self-contained

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The History of Management Accounting

• Management accounting developed to meet
  managements needs for information as complexity
  and uncertainty increased with geographical
  expansion and product diversification

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Most Innovative in Management?

• Peter Drucker, in The Emerging Theory of
  Manufacturing, HBR, May-June, 1990, pp.94-102),
  made the following comment
• The most exciting and innovative work in
  management today is found in accounting theory,
  with new concepts, new methodology --even what
  might be called new economic philosophy --rapidly
  taking shape. And while there is enormous
  controversy over specifics, the linaments of the
  new manufacturing accounting are becoming clearer
  every day.

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Emerging Themes of 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 Environment
• Deregulation and Growth in the Service Industry
• Activity-based Management

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The Accounting Function in a Manufacturing
Organization
President
Production Vice-president
Financial Vice-president
Controller
Treasurer
Machining Supervisor
Assembly Supervisor
Controllers Functions
Treasurer's Functions
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Role of Controller and Treasurer
Controller
Treasurer
1.
Financial reports 2. Securities commission
reporting 3. Tax planning and reporting 4.
Performance reporting 5. Internal auditing 6.
Budgeting 7. Accounting systems and internal
controls
1. Collection of cash 2. Monitoring of cash
payments 3. Monitors cash
availability 4. Short-term investments 5. Short
and long-term borrowing 6. Issuing of
capital stock
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Management Accounting and Ethical Conduct
Some Types of Unethical Conduct

• Abuse of accounting information
• Acceptance of bribes or gifts
• Conflict of interest
• Disclosure of confidential information

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Standards of Ethical Conduct for Management
Accountants

• Competence
• Confidentiality
• Integrity
• Objectivity

Ethical Behavior
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Standard No. 1--Competence
Management Accountants have a responsibility to

• Maintain professional competence.
• Perform professional duties in accordance with
  relevant laws, regulations, and technical
  standards.
• Prepare complete and clear reports and
  recommendations.

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Standard No. 2--Confidentiality
Management Accountants have a responsibility to

• Refrain from disclosing confidential information.
• Inform subordinates as to how to handle
  confidential information.
• Refrain from using confidential information for
  unethical or illegal advantage.

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Standard No. 3--Integrity
Management Accountants have a responsibility to

• Avoid conflicts of interest.
• Refrain from activity that would prejudice their
  ability to carry out their duties.
• Refuse gifts, favors, or hospitality that would
  influence their actions.
• Recognize and communicate professional
  limitations that would preclude responsible
  judgment.
• Communicate unfavorable as well as favorable
  information.
• Refrain from engaging in or supporting any
  activity that would discredit the profession.

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Standard No. 4--Objectivity
Management Accountants have a responsibility to

• Communicate information fairly and objectively.
• Disclose fully all relevant information that
  could reasonably be expected to influence user's
  understanding of the reports, comments, and
  recommendations presented.

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Resolving Ethical Conflict
Courses of action

• Discuss problems with immediate supervisor except
  when it appears the superior is involved.
• If the immediate superior is the chief executive
  officer, or equivalent, the acceptable reviewing
  authority may be the audit committee, board of
  trustees, or owners.
• Clarify relevant concepts by confidential
  discussion with an objective advisor to obtain an
  understanding of possible courses of action.
• If the ethical conflict still exists after
  exhausting all levels of internal review, the
  management accountant may have no other recourse
  but to resign.
• Except where legally prescribed, communication of
  such problems with external parties is not
  appropriate.

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Professional Designations

• CA- The distinguishing characteristic of the
  profession is its unchallenged right to provide
  assurance concerning the reliability of financial
  statements to external parties.
• CMA-The distinguishing characteristic of the
  profession is its upholding of management
  accounting as a recognized, professional
  discipline, separate from public accounting.
• CGA- CGAs can specialize in financial,
  managerial, or tax accounting but the right to
  audit financial statements is somewhat restricted.

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Questions from the Back of Chapter 1

• Questions for writing and discussion
• Warmup exercises
• Exercises
• Problems
• Managerial decision cases

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The End