Chapter 1 Introduction Decision Making Planning settings goals and objectives and determining how to achieve them translates into budgets Directing overseeing day to day operations Controlling evaluating results of operations against the plan and making adjustments Issue Managerial Accounting Primary Users of Info internal users managers Purpose of Info to help managers plan direct control make decisions Financial Accounting external users creditors stockholders government to help external users make investing lending decisions Primary Accounting Product What is included in report format Underlying basis of info Emphasized info characteristic What business unit How often are reports prepared Who verifies info any internal accounting report deemed worthwhile by mgmt financial statements mgmt determines what it wants in report reports are only prepared when mgmt believes the benefit exceeds the cost of preparing GAAP determine the content and form of statements managerial accounting focuses mostly on the future provides info on both external and internal transactions the info is based on historical transactions with external parties data must be relevant segments of the business such as products customers regions divisions whenever mgmt wants daily just once annually and quarterly there are no independent audits however the internal audit function may examine the procedures data must be reliable and objective the company as a whole independent CPAs audit the annual statemnts of public companies SEC for public Is info no required by outside group Affect on employee behavior mgmt considers behavioral implications when designing the managerial accounting system companies behavior implications are secondary to the adequacy of disclosure COO responsible for the company s operations such as R D production and distribution CFO responsible for the company s financial concerns Treasurer responsible for raising capital and investing funds reports directly to the CFO Controller responsible for financial and managerial accounting and tax reporting reports directly to the CFO Internal Audit Function ensure that the company s internal controls and risk management policies are functioning properly reports to the audit committee Changing Roles of MGMT Accountants impact of technology ensuring accurate financial records planning analyzing interpreting accounting data providing decisions support Institute of Management Accountants IMA Professional association for management accountants Certification CMA Practice Development Education Networking Ethical Standards Public Education Ethical Standards Competence Confidentiality Integrity Credibility Sarbanes Oxley Act of 2002 SOX restore trust in publicly traded corporations their management their auditors and their financial statements CEO and CFO assume responsibility for financial statements and disclosure accept responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting annual assessment Requires independent audit committee Increases white collar crime penalties International Financial Reporting Standards IFRS vs GAAP Globalization causes a necessity for consistent reporting standards worldwide Shifting Economy shift away from manufacturing toward service managerial accounting has expanded Competing in a Global Marketplace trade barriers have fallen more timely info is needed XBRL Extensible Business Reporting Language enables companies to release financial business info in a format that can be quickly and efficiently accessed sorted and analyzed tagging each piece of reported financial data Tools for Time Based Competition Enterprise Resource Planning ERP system that integrates a company s functions departments and data Advantages streamline operations respond quickly to changes replace separate software systems Disadvantage expensive E commerce needed to survive in a global economy used for budgeting planning selling customer service Supply chain management exchange of info with suppliers to reduce cost improve quality speed the delivery Lean production A philosophy and business strategy of manufacturing without waste lowers cost increases competitive position Just in time JIT manufacturing just in time to fill orders reduces raw materials inventory finished goods inventory storage costs handling costs throughput time is the time between buying raw materials and selling finished products Total quality management TQM goal to provide customers with superior products and services continually set higher goals for quality International Organization for Standardization ISO international quality management standards ISO 9001 2008 Chapter 2 Building Blocks of Managerial Accounting Types of Companies Service Companies provide a service only intangible services largest sector of the US economy no inventory Examples accountants banks doctors lawyers Merchandisers resell products purchased from suppliers tangible products one inventory account cost of goods good of freight in tariffs etc Examples amazon com J C Penney Sears Retailers to consumers vs Wholesalers to retailers Manufacturers use labor plant and equipment to convert raw materials into finished products tangible products from raw materials sell to retailers or wholesalers examples crayola dell craftsman tools 3 inventory accounts raw materials work in process finished goods Value Chain Activities that add value to products and services and cost money R D research and developing new or improved products services and the processes for producing them manufacturing Design detailed engineering of products and services and the processes for producing them Production Purchases resources used to produce a product or service or to purchase finished merchandise to resell Marketing promotion and advertising of products and services Distribution delivery of products or services to customers Customer Service support provided for customers after the sale Cost Object Anything for which managers want a separate measurement of cost Ex Toyota specific cars different models alternative marketing strategies geographic regions functional departments Direct Cost a cost that can be traced to the cost object Indirect Cost a cost that relates to the cost object but cannot be traced to it Total cost attributable to a cost object must assign all direct and indirect costs to the cost object trace direct costs precise allocate indirect costs among all objects
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