Chapter 1 Introduction to Managerial Accounting 1 What is Managerial Accounting Focuses on providing internal management with the information it needs to run the company efficiently and effectively a Four Primary Responsibilities Planning directing controlling and decision making i Planning Setting goals and objectives for the company and determining how to achieve them translate plans to budgets or quantitative expressions of a plan 1 Example Generate more sales by opening more restaurant chains ii Directing Overseeing the company s day to day operations 1 Use product cost reports product sales information and reports to run daily business operations a Example Determining which menu items are generating the most sales and using that information to adjust menus and marketing strategies iii Controlling Evaluating the results of business operations against the plan and making adjustments to keep the company pressing towards its goals 1 Example Using performance reports to compare each restaurant s actual performance against the budget and then uses the feedback to take corrective actions if needed b Differences Between Managerial Accounting and Financial Accounting i Accounting system is designed to provide its managers with the accounting information they need to plan direct control and make decisions ii No GAAP type standards or audits iii Weigh benefits of the system against costs to develop and run the system iv Focus on the future smaller units of the company vs the whole v Reports plan for and reflect internal transactions vi Prepare and revise reports as often as needed 2 What Role Do Management Accountants Play a Organizational Structure Corporations elect a board of directors to oversee the company i Chief Executive Officer CEO Manage company on a daily basis and hires other executives to run various aspects of the organization 1 Chief Operating Officer COO Responsible for company s operations of the value chain such as research and development production and distribution 2 Chief Financial Officer CFO Responsible for all the company s financial concerns a Treasurer Responsible for raising capital by issuing stocks and bonds b Controller Responsible for general financial accounting managerial and investing funds accounting and tax reporting ii Internal Audit Function Required by the NSE in order to ensure that the company s internal controls and risk management policies are functioning properly 1 Reports directly to a subcommittee of the board of directors called the audit committee and to the CFO or CEO a Audit committee oversees the internal audit function as well as the annual audit of the financial statements by independent CPAs iii Cross Functional Teams Employees representing various functions of the company such as R D design production marketing distribution and customer service 1 Each member can address business decisions from a different viewpoint b Changing Roles of Management Accountants i Technology has changed the roles of management accountants computer programs perform all routine mechanical accounting tasks 1 Management accountants are now viewed as internal consultants or business advisors 2 They help design the information systems that capture and record transactions and make sure that the information systems generate accurate data 3 Often referred to as business management support financial advisors business c Skills Required partners or analysts i Must be able to communicate with the computer IT system programmers to create an effective information system once the data is generated management accountants need to interpret and analyze the raw data and turn it into USEFUL information ii Solid knowledge of both financial and managerial accounting iii Analytical skills iv Knowledge of how a business functions v Ability to work on a team vi Oral and written communication skills d Professional Association i Institute of Management Accountants IMA Professional association for management accountants 1 Mission To provide a dynamic forum for management accounting and finance professionals to develop and advance their careers through certification practice development education networking and advocacy of the highest ethical and professional practice 2 Wants to educate society about the role management accountants play in organizations 3 Issues the Certified Management Accountant CMA Those with a degree receive higher salaries and obtain higher level positions within the company i IMA has developed principles and standards to help management accountants deal with e Ethics these challenges 1 Maintain their professional competence 2 Preserve the confidentiality of the information they handle 3 Uphold their integrity 4 Perform their duties with credibility ii IMA s overarching principles include Honesty Fairness Objectivity and Responsibility iii Not all unethical behavior is illegal but all illegal behavior is unethical 1 Unethical behavior includes Dishonesty unfairness lack of objectivity irresponsibility 3 What Regulatory and Business Issues Affect Today s Management Accountants a Sarbanes Oxley Act SOX of 2002 Works to restore trust in publicly traded corporations their management their financial statements and their auditors i Enhances internal control and financial reporting requirements and establishes new regulatory requirements for publicly traded companies and their auditors ii Requires CEO and CFO to assume responsibility for the financial statements and disclosures 1 Must also accept responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting iii Requires audit committee members to be independent they may not receive any consulting or advisory fees from the company other than for their service on the board of directors 1 To ensure independence CPA firms are not allowed to perform non audit services during the time period in which they are to perform audit services Tax services may be provided if pre approved by the audit committee iv Increases penalties for white collar crimes such as corporate fraud b International Financial Reporting Standards IFRS c Extensible Business Reporting Language XBRL Enables companies to release financial and business information in a format that can be quickly efficiently and cost effectively accessed sorted and analyzed over the Internet i Uses a standardized coding system to tag each piece of reported financial and business data so that it can be read by
View Full Document
Unlocking...