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Chapter _1 - PowerPoint - Chapter 1 Management Accounting:...

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Unformatted text preview: Chapter 1 Management Accounting: Its Management Environment and Future Environment ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 1 ­ 1 What is Management Accounting? LO1 Describe management accounting and contrast it with financial accounting. • Management accounting is: Management the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control ... an organization. Source: Institute of Management Accounting, 1981 ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 2 LO1 Management Accounting Management • Cost accounting is a narrow application of management accounting. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 3 LO1 Management Accounting Management • Institute of Management Accountants (IMA) Institute www.imanet.org • Certified Management Accountant (CMA)® Certified ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 4 LO1 Contrasting Financial and Contrasting Management Accounting Management • External: External: – Stockholders (present and potential) Stockholders – Banks and other lending institutions Banks – Bondholders (present and potential) Bondholders – Suppliers Suppliers – Customers Customers – Competitors Competitors – Governments Governments ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 5 LO1 Contrasting Financial and Contrasting Management Accounting Management • Internal: Internal: – Marketing managers Marketing – Salespersons Salespersons – Production managers Production – Production supervisors Production – Strategic planners Strategic – Company president Company – Company engineers Company ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 6 LO1 Contrasting Financial and Contrasting Management Accounting Management Financial accounting Focus Profitability Solvency Liquidity Management accounting Focus Efficiency Productivity Quality ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 7 LO1 Contrasting Financial and Contrasting Management Accounting Management Financial Accounting Principal users External parties Rules and regulations Governed by GAAP Level of detail Deals with the company as a whole Timeliness Quarterly and annually provided in a reasonable amount of time Orientation The past Management Accounting Internal parties No rules Deals with various parts of the company As users need provided very quickly The future ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 8 LO1 Accounting Rules • The financial accountant is governed by GAAP The (generally accepted accounting principles). • The management accountant does not need The to follow these rules. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 9 LO1 Level of Detail • Financial accounting statements are Financial known as general purpose statements. • There are many different external users There that must rely on the same statements. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 10 LO1 Level of Detail • Management accounting reports Management are typically much more detailed. • They possibly deal only with the information They related to one particular decision. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 11 LO1 Timeliness • Timeliness is always an important Timeliness feature of useful information. • Users of financial accounting know that Users they can expect to receive information on a quarterly and annual basis. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 12 LO1 Timeliness • Good timing for accounting information Good depends upon the situation. • Some managers may need daily, or Some even hourly, reports; others may only need weekly or monthly. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 13 LO1 Future Orientation • Financial accounting provides information Financial about past results. • Predictive value is desired, but not required. Predictive • Management accounting information is Management used primarily for decision making, and these decisions affect the future of the firm. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 14 LO1 Where Accounting Fits in a Company • The treasurer is typically responsible treasurer for managing the company’s cash, credit, and investments. • For most firms, the controller is the controller chief accountant, the person ultimately in charge of the accounting system. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 15 The Origin and Evolution of The Management Accounting Management LO2 Explain major historical developments that have affected management accounting. • Four major factors have had an impact: Four I. II. III. IV. Emergence of permanent employees Emergence The Industrial Revolution The Scientific management Scientific Diversification Diversification ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 16 LO2 Emergence of Permanent Employees • When firms primarily hired independent When contractors, no formal communication system was needed. system • It was also relatively easy to determine It the cost of producing a product. • Permanent employees and the development Permanent of the “factory” concept changed all of that. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 17 LO2 Industrial Revolution From 1825 to 1925... businesses greatly increased their investment in property, plant, and equipment. Hierarchical levels of management ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 18 LO2 Scientific Management • The basic philosophy of scientific management The is that the principal object of management should be to maximize the prosperity should of the employer and also of each employee. • One of the major features of the scientific One management philosophy was that workers need to be evaluated in comparison to a “standard” for performance. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 19 LO2 Diversification • During the first two decades of the 20th During century, companies began to diversify. century, • Owners could not directly manage Owners all the various business operations. • Lower level managers received reports Lower that focused on production efficiencies. • Higher level managers received reports Higher that focused on product profits. that ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 20 Accounting’s Role in Planning, Accounting’s Directing, Motivating, and Controlling Directing, LO3 Describe the relationship between business management and management accounting. • Business managers spend a considerable amount of time planning for the future. amount • Company accountants can assist managers Company by helping them formalize business plans iin a meaningful way. n ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 21 Challenges and Trends in Challenges Management Accounting Management LO4 Describe how changes in management accounting effect today’s business. • By the mid-1980s, U.S. companies had By recognized that they had a problem. • Businesses began using production and Businesses management techniques that were initiated in other countries. • Businesses reorganized their operations Businesses to become more competitive. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 22 Consumers of Management Consumers Accounting Information Accounting LO5 Explain how business people use management accounting information and skills. • To make effective decisions, business To managers must understand the firm’s management accounting system. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 23 LO5 Consumers of Management Consumers Accounting Information Accounting • Every decision results in an outcome, Every and even good decisions can lead to bad outcomes. • Accounting information can be used Accounting to make decisions. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 24 End of Chapter 1 ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting , 3e Werner/Jones 1 ­ 1 ­ 25 ...
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This note was uploaded on 01/19/2012 for the course ACC 212 taught by Professor Quintanna during the Spring '08 term at University of Miami.

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