Managerial Accounting
Chapter 1
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
1
Objective 1
Identify managers’ three primary responsibilities Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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Managers’ Responsibilities
Planning
Decision
Making
Setting goals and objectives Directing
Overseeing day-to-day operations Controlling
Evaluating results of operations
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
3
Planning
• Setting goals and objectives and how to achieve them
• Examples of planning
– Generate more sales via opening new stores
– Reduce labor costs by reducing store hours
• Budgets
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
4
Directing
• Overseeing company’s day-to-day operations
• Examples
– Using daily/weekly sales reports to adjust marketing strategies
– Using product cost reports to adjust raw material usage
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
5
Controlling
• Evaluating results of operations against plans and making adjustments as needed
• Examples
– Comparing budgeted sales with actual sales to take corrective actions
– Comparing budgeted product costs against actual product costs to take corrective actions
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
6
Objective 2
Distinguish financial accounting from managerial accounting
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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Managerial vs. Financial Accounting
Issue
Managerial
Financial
Primary users
Internal
External
Purpose of information Plan, direct, control, decide
Users make investing and lending decisions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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Managerial vs. Financial Accounting
Issue
Managerial
Financial
Primary accounting product
Internal reports useful to management General purpose financial statements
What is included? Defined by management Determined by
GAAP
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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Managerial vs. Financial Accounting
Issue
Managerial
Underlying basis of information
Emphasis
Financial
Internal and external transactions, focus on future
Based on historical transactions with external parties
Data must be relevant Data must be reliable and objective Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
10
Managerial vs. Financial Accounting
Issue
Managerial
Financial
Business unit
Segments of the business Company as a whole Preparation
Depends on management needs
Annually and quarterly Verification
Internal audit
External audit
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
11
Managerial vs. Financial Accounting
Issue
Managerial
Financial
Information requirements No requirement
SEC requires publicly traded companies to issue audited financial statements
Impact on employee behavior
Careful consideration Adequacy of disclosure Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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Objective 3
Describe organizational structure and the roles and skills required of management accountants within the organization
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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Organizational Structure
Board of
Directors
Audit
Committee
Chief Executive
Officer
Chief Operating
Officer
Vice Presidents of Various
Operations
Chief Financial
Officer
Treasurer
Controller
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Internal Audit
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Changing Roles of Management
Accountants
• Impact of technology
• Ensuring accurate financial records
• Planning, analyzing, and interpreting accounting data
• Providing decision support
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
15
Required Skills of Managerial Accountants
• Knowledge of financial and managerial accounting • Analytical skills