Chapter 1

The Changing Role of

Managerial
Accounting in a
Dynamic Business
Environment

Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objective 1-1 – Define managerial accounting
and describe its role in the management process.

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Managerial Accounting: A Business
Partnership with Management

Managerial accounting is the process of

 Identifying
 Measuring
 Analyzing
 Interpreting
 Communicating information

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Learning Objective 1-2 - Explain four fundamental
management processes that help organizations attain their
goals.

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Managing Resources, Activities, and People
An organization . . .
Decision
Making

Acquires Resources Planning

Organized set
of activities

Controlling Directing
Hires People
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Learning Objective 1-3 – List and describe five
objectives of managerial accounting activity.

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 Objectives of Managerial Accounting
Activity

Providing information for decision making and planning.

Assisting managers in directing and controlling activities.
Motivating managers and other employees towards
organization’s goals.
Measuring performance of subunits, activities, managers,
and other employees within the organization.
Assessing the organization’s competitive position and
working with other managers to ensure the organization’s
long-run competitiveness in its industry.

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 Examples of Management
Accounting Practices
Facebook’s initial IPO found stock shares trading at
50% below their initial per share price. Management
accountants analyzed costs and benefits of different
courses of action to help improve the company’s
monetization. A few years later, Facebook was trading
at three times its IPO price.
Walmart was slow to embrace internet sales. Walmart
is still experimenting with ways to be profitable.
Managerial accounting analyses are showing which
initiatives are profitable.
 The Balanced Scorecard
How do we Financial Perspective
look to Goals Measures
In which
owners? activities
must we
excel?
Customer Perspective Operations Perspective
Goals Measures Goals Measures
How do
customers
see us?
How can we
Innovation Perspective continue to
Goals Measures improve and
create value? 1-9
Learning Objective 1-4 – Explain the major differences
between managerial and financial accounting.

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Managerial versus Financial Accounting
Accounting System
(accumulates financial and
managerial accounting data in the
cost accounting system)

Managerial Accounting Financial Accounting

Information for decision Published financial
making, planning, and statements and other
controlling an financial reports.
organization’s
operations.
Internal External
Users Users
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Managerial versus Financial Accounting
Managerial Accounting Financial Accounting
Users of Interested parties, outside the
Information Managers, within the organization. organization.
Regulation Not required and unregulated, since it Required and must conform to
is intended only for management. generally accepted accounting
principles. Regulated by the Financial
Accounting Standards Board, and, to
a lesser degree, the Securities and
Exchange Commission.
Source of The organization's basic accounting Almost exclusively drawn from the
Data system, plus various other sources, organization's basic accounting
such as rates of effective products system, which accumulates financial
manufactured, physical quantities of
information.
material and labor used in production,
occupancy rates in hotels and
hospitals, and average take-off delays.
Nature of Reports often focus on subunits within Reports focus on the enterprise in its
Reports and the organization, such as departments, entirety. Based almost exclusively on
Procedures divisions, geographical regions, or historical transaction data.
product lines. Based on a combination
of historical data, estimates, and
projections of future events.

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Learning Objective 1-5 – Describe the accounting and
finance structure in an organization.

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Line and Staff Positions
 A line position is directly  A staff position supports and
involved in achieving the assists line positions.
basic objectives of an Example: A cost
organization. accountant in the
Example: A production
manufacturing plant.
supervisor in a
manufacturing plant.

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Learning Objective 1-6 - Describe the roles of an
organization’s chief financial officer (CFO) or controller,
treasurer, and internal auditor.

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CFO or Controller
The chief managerial and financial accountant is
responsible for:
Supervising accounting personnel.
Preparation of information and reports, managerial and
financial.
Analysis of accounting information.
Planning and decision making.

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Treasurer
Responsible for raising capital and safeguarding the
organization’s assets.
Supervises relationships with financial institutions.
Work with investors and potential
investors.
Manages investments.
Establishes credit policies.
Manages insurance coverage

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Internal Auditor
Responsible for reviewing accounting procedures, records, and
reports in both the controller’s and the treasurer’s area of
responsibility.
Expresses an opinion to top
management regarding the
effectiveness of the
organization’s accounting
system and its system of
internal controls.

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Learning Objective 1-7 – Understand and explain the
value chain concept.

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 Strategic Cost Management and the Value
Chain

Product
Design
Production
Research
and
Development Marketing

Securing raw
materials and Distribution
other resources

Customer
Start Service

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Learning Objective 1-8 - Explain how investments in
capacity affect managerial decision making.

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Capacity
Theoretical Capacity is the upper limit on the amount
of goods or services if everything works perfectly.

Practical capacity allows for normal occurrences such

as cash register downtime and cashier fatigue or illness.
 Cost Management Systems
Objectives
Measure the cost of resources consumed.
Identify and eliminate non-value-added costs.
Determine efficiency and effectiveness of major
activities.
Identify and evaluate new activities that can
improve performance.

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Learning Objective 1-9 – Discuss the professional
organizations and certifications in the field of managerial
accounting.

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Managerial Accounting as a Career
Professional Organizations

Institute of Management Accountants (IMA)

Administers Develops
Publishes Certified Standards of
Management Management Ethical
Accounting Accountant Conduct for
and research (CMA) Management
studies. program Accountants
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Learning Objective 1-10 – Describe the ethical
responsibilities and ethical standards that apply to managerial
accounting.

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Ethical Climate of Business
The corporate scandals experienced over the last few
years have shown us that unethical behavior in business
is wrong in a moral sense and can be disastrous in the
economy. In addition to Sarbanes-Oxley, there will
likely be more reforms in corporate governance and
accounting.

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Professional Ethics

Competence
Confidentiality
Integrity
Credibility

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End of Chapter

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