ABOUT THE MANAGERIAL ACCOUNTING OF THE MANAGER

1. Managerial Accounting and the Business Organization PRESENTED BY BABASAB PATIL

3. Users of Accounting Information use information for day-to-day operating decisions... Internal managers… and for long-range strategic decisions.

4. Users of Accounting Information External parties: use information for making decisions about the company. Investors Government authorities

5. What kinds of Accounting Information do Managers Need? Good accounting information helps an organization achieve its goals and objectives.

6. Uses of Accounting Information This is the accumulating and classification of data. Am I doing well or poorly? Scorekeeping:

7. Uses of Accounting Information Which problems should I look into? Attention directing means reporting and interpreting information that helps managers to focus on operating problems. Attention directing:

8. Uses of Accounting Information This role asks: Of the several alternatives available, which is the best? This often involves special studies. Problem solving:

10. Influences on Accounting Systems An accounting system is a formal mechanism for gathering, organizing, and communicating information about an organization’s activities.

11. Influences on Accounting Systems Generally accepted accounting principles (GAAP) Foreign Corrupt Practices Act Internal control Management audits

12. Influences on Accounting Systems In 2002 the Sarbanes-Oxley Act required chief executive officers to sign a statement verifying the accuracy of the company’s financial statements. Sarbanes-Oxley Act:

13. Importance of Ethics No regulation can be as effective in ensuring reliability as high ethical standards of accountants.

14. Management Accounting in Service and Nonprofit Organizations Service organizations Nonprofit organizations Accounting firms Law firms Real estate firms Banks Hotels Hospitals Schools Libraries Museums Government agencies

15. Service Organizations Labor is intensive. Output is usually difficult to define. Major inputs and outputs cannot be stored.

16. Cost-Benefit and Behavioral Considerations 1. Cost-benefit balance 2. Behavioral implications

17. Cost-Benefit Balance The primary consideration in choosing among accounting systems and methods is weighing estimated costs against probable benefits.

18. Behavioral Implications The system must provide accurate, timely budgets and performance reports in a form useful to managers. If managers do not use accounting reports, the reports create no benefits.

20. The Nature of Planning and Controlling It is the purposeful choice from among a set of alternative courses of action designed to achieve some objective. What is decision making? This is the core of the management process.

21. The Nature of Planning and Controlling The management process internal accounting system: Planning – Improve profitability Controlling – Actions – Evaluations Corrections and revisions of plans and actions Budgets, Special reports Accounting system Performance reports Customer surveys Competitor analysis Advertising impact New items report

22. Role of Budgets A budget is a quantitative expression of a plan of action. The Starbucks store would express its plan for product growth and improved marketing through revenue and advertising budgets.

23. Performance Reports What are performance reports? These are reports that compare actual results with budgeted amounts.

24. Performance Reports Performance reports formalize controls and provide feedback by comparing results with plans and by highlighting variances. Variances are deviations from the plan.

25. Performance Reports Budget Actual Variance Sales $50,000 $50,000 0 Less: Ingredients 22,000 24,500 $2,500 U Store labor 12,000 11,600 400 F Other labor 6,000 6,050 50 U Utilities, etc. 4,500 4,500 0 Total expenses $44,500 $46,650 $2,150 U Operating income $ 5,500 $ 3,350 $2,150 U Starbucks Mayfair Store, March 31, 2004

27. Planning and Control for Product Life Cycles and the Value Chain Product life cycle refers to the various stages through which a product passes.

28. Planning and Control for Product Life Cycles and the Value Chain Product development Introduction to market Mature market Product phase-out

29. The Value Chain Support functions R & D Design Production Marketing Distribution Service

30. Value Chain Functions Research and development… is the generation of, and experimentation with, ideas related to new products, services, or processes.

31. Value Chain Functions Design… is the detail and engineering of products.

32. Value Chain Functions Production… is the coordination and assembly of resources to produce a product or deliver a service.

33. Value Chain Functions Marketing… is the manner by which individuals or groups learn about the value and features of products or services.

34. Value Chain Functions Distribution… is the mechanism by which products or services are delivered to the customer.

35. Value Chain Functions Customer service… is the support activities provided to the customer.

37. Accounting’s Position in the Organization Preparing standardized reports Collecting and compiling information Interpreting and analyzing information Being involved in decision making

38. Line and Staff Authority Line managers Staff managers Cross-functional teams

39. Controller and Treasurer Functions Financial Vice-President or CFO Treasurer Controller

43. Career Opportunities in Management Accounting The Certified Management Accountant (CMA) designation is the internal accountant’s counterpart to the CPA. CMAs must pass an examination that has four parts:

44. Career Opportunities in Management Accounting 1. Economics, finance, and management 2. Financial accounting and reporting 3. Management reporting, analysis, and behavioral issues 4. Decision analysis and information systems.

46. Current Trends Shift from a manufacturing-based to a service-based economy Increased global competition Advances in technology Changes in business processes Factors causing changes in management accounting:

47. Current Trends Just-in-time (JIT) philosophy Computer-aided design Computer-aided manufacturing Computer-integrated manufacturing

49. Standards of Ethical Conduct The Institute of Management Accountants (IMA) is the largest association of management accountants in the United States. The IMA has issued a Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management.

50. Pressures for Unethical Behavior Ignoring the small stuff Economic cycles Accounting rules Emphasis on short-term results

51. End of Chapter 1