chapter 01final

7/29/2019 Chapter 01final

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The Accountants Role in the Organization

2009 Pearson Prentice Hall. All rights reserved.


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Accounting Discipline Overview Managerial Accounting measures, analyzes and

reports financial and nonfinancial information to helpmanagers make decisions to fulfill organizationalgoals. Managerial accounting need not be GAAPcompliant.

Financial Accounting focus on reporting to externalusers including investors, creditors, and governmentalagencies. Financial statements must be based onGAAP.



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Major Differences Between

Financial & Managerial AccountingManagerial Accounting Financial Accounting

Purpose Decision makingCommunicate financial

position to outsiders

Primary Users Internal managers External users

Focus/Emphasis Future-oriented Past-oriented

RulesDo not have to follow GAAP;

cost vs. benefitGAAP compliant;

CPA audited

Time SpanUltra current to very long

time horizonsHistorical monthly,

quarterly reports

BehavioralIssues

Designed to influenceemployee behavior

Indirect effects onemployee behavior



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Strategy & Management Accounting

Strategy specifies how an organization matches itsown capabilities with the opportunities in themarketplace to accomplish its objectives

Strategic Cost Management focuses specifically on

the cost dimension within a firms overall strategy



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Strategy & Management Accounting Management accounting helps answer important

questions such as: Who are our most important customers, and how do we

deliver value to them?

What substitute products exist in the marketplace, and

how do they differ from our own? What is our critical capability?

Will we have enough cash to support our strategy or willwe need to seek additional sources?



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Management Accounting and Value Creating value is an important part of planning and

implementing strategy

Value is the usefulness a customer gains from acompanys product or service



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Management Accounting and ValueValue Chain is the sequence of business functions

in which customer usefulness is added to productsor services

The Value-Chain consists of:1. Research & Development

2. Design

3. Production

4. Marketing5. Distribution

6. Customer Service



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The Value Chain Illustrated



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A Value Chain Implementation



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Key Success Factors The dimensions of performance that customers

expect, and that are key to the success of a companyinclude:

Cost and efficiency

Quality

Time

Innovation



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Planning & Control Systems Planning selects goals, predicts results, decides how to

attain goals, and communicates this to theorganization

Budget the most important planning tool

Control takes actions that implement the planningdecision, decides how to evaluate performance, and

provides feedback to the organization



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A Five-Step Decision Making Process inPlanning & Control

1. Identify the problem and uncertainties2. Obtain information

3. Make predictions about the future

4. Make decisions by choosing between alternatives

5. Implement the decision, evaluate performance, andlearn



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Management Accounting Guidelines

Cost Benefit approach is commonly used: benefitsgenerally must exceed costs as a basic decision rule

Behavioral & Technical Considerations people areinvolved in decisions, not just dollars and cents

Different definitions of cost may be used for differentapplications



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A Typical Organizational Structure andthe Management Accountant



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Professional Ethics The four standards of ethical conduct for management

accountants as advanced by the Institute ofManagement Accountants:

Competence

Confidentiality

Integrity

Objectivity



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chapter 01final

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