ACCTG 231 Lecture 1Managerial Accounting: An Overview Outline of Current Lecture I. Financial and Managerial Accounting: Seven Key DifferencesII. Work of ManagementIII. Managerial Accounting ActivitiesIV. Accounting MajorsV. Certified Management AccountantVI. CMA ExamVII. Strategic ManagementVIII. Customer Value PropositionsIX. Enterprise Risk ManagementX. Process ManagementXI. Lean ProductionCurrent LectureI. Financial and Managerial Accounting: Seven Key DifferencesFinancial Accounting Managerial Accounting1. Users External persons who make financial decisionsManagers who plan for and control an organization2. Time Focus Historical perspective Future emphasis3. Verifiability vs.relevanceEmphasis on objectivity and verifiabilityEmphasis on relevance4. Precision vs. TimelinessEmphasis on precision Emphasis on timeliness5. Subject Primary focus is on companywide reportsFocus on segment reports6. Rules Must follow GAAP/IFRS and prescribed formatsNot bound by GAAP/IFRS or any prescribed format7. Requirement Mandatory for external Not mandatoryThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.reportsII. Work of Management- Planningo Establish Goals  Specify how goals will be achieved  Develop budgets- Controllingo The control function gathers feedback to ensure that plans are being followedo Feedback in the form of performance reports that compare actual results with the budget are an essential part of the control function- Decision Makingo Decision making involves making a selection among competing alternatives What should we be selling? Who should we be serving? How should we execute?III. Managerial Accounting Activities- Marketing Majorso Planning How much should we budget for TV, print, and Internet advertising? How many salespeople should we plan to hire to serve a new territory?o Controlling Is the budgeted price cut increasing unit sales as expected? Are we accumulating too much inventory during the holiday shopping season?o Decision Making Should we sell our services as one bundle or sell them separately? Should we sell directly to customers or use as a distributor?- Operations Management Majorso Planning How many units should we plan to produce next period? How much should we budget for next period’s utility expense?o Controlling Did we spend more or less than expected for the units we actually produced? Are we achieving out foal of reducing the number of defective units produced?o Decision Making Should we buy a new piece of equipment or upgrade our existing machine? Should we redesign our manufacturing process to lower inventory levels?- Human Resource Management Majorso Planning How much should we plan to spend for occupational safety training? How much should we plan to spend on employee recruitment advertising?o Controlling Is our employee retention rate exceeding our goals? Are we meeting our goal of completing timely performance appraisals?o Decision Making Should we hire an on-site medical staff to lower our healthcare costs? Should we hire temporary workers or full-time employees?IV. Accounting Majors- The IMA estimates that 80% of professional accountants in the U.S. work in non-public accounting environments- Employers will expect you to have strong financial accounting skills and to help improve organizational performanceV. Certified Management Accountant- A Management accountant who has the necessary qualifications and who passes a rigorous professional exam earns the right to be known as a Certified Management Accountant (CMA)VI. CMA Exam- Part 1: Financial Planning, Performance and Controlo Planning, budgeting, and forecastingo Performance managemento Cost managemento Internal controlso Professional ethics- Part 2: Financial Decision Makingo Financial statement analysiso Corporate financeo Decision analysis and risk managemento Investment decisionso Professional ethicsVII. Strategic Management- A strategy is a “game plan” that enables a company to attract customers by distinguishing itself from competitors- The focal point of a company’s strategy should be its target customersVIII. Customer Value Propositions- Customer Intimacy Strategyo Understand and respond to individual customer needs- Operational Excellence Strategyo Deliver products and services faster, more conveniently, and at lower prices- Product Leadership Strategyo Offer higher quality productsIX. Enterprise Risk Management- A process used by a company to proactively identify and manage risk- Once a company identifies its risks, perhaps the most common risk management tactic is to reduce risks by implementing specific controlsExamples of Business Risks Examples of Controls to Reduce Business RisksProducts harming customers Develop a formal and rigorous new product testing programLosing market share due to the unforeseen actions of competitorsDevelop an approach for legally gathering information about competitors’ plans and practicesPoor weather conditions shutting downoperationsDevelop contingency plans for overcoming weather-related disruptionsWebsite malfunction Thoroughly test the website before going “live” on the InternetA supplier strike halting the flow of rawmaterialsEstablish a relationship with two companies capable of providing raw materialsFinancial statements unfairly reporting the value of inventoryCount the physical inventory on hand to make sure that it agrees with the accounting recordsAn employee accessing unauthorized informationCreate password-protected barriers that prohibit employees from obtaininginformation not needed to do their jobs Process Management A business process is a series of steps that are followed in order to carry out some task in business. Business functions making up the value chaino R&D, Product Design, Manufacturing, Marketing, Distribution, Customer Service Lean Production Customer places an orderCreate production ordergenerate component requirementscomponents orderedproduction begins as parts arrivegoods delivered when needed Lean production is often called Just-In-Time (JIT) production Traditional Manufacturingo Produce goods in anticipation of salesstore inventorymake sales from finished goods inventory Because lean thinking only allows production in response to customer orders, the