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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 1 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-1 Introduction to Management Accounting
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 2 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-2 Chapter 1 Introduction to Management Accounting Managerial Accounting, the Business Organization, and Professional Ethics
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 3 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-3 Users of Accounting Information Internal managers Creditors: Suppliers Bankers Day-to-day operating decisions Long-range strategic decisions Management Accounting Financial Accounting External Users Investors: Stockholders Government Authorities Learning Objective 1
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 4 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-4 Scorekeeping: Evaluate Organizational Performance Attention Directing: Compare Actual Results to Expected Problem Solving: Assess Possible Courses of Action Decision Making
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 5 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-5 Process of gathering, organizing, and Communicating financial information Financial Statements Accounting Information System
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 6 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-6 Influences on Accounting Systems Generally accepted accounting principles (GAAP) Foreign Corrupt Practices Act Internal controls Management audits Sarbanes-Oxley Act Internal auditors
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 7 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-7 Sarbanes-Oxley Act In 2002, the Sarbanes-Oxley Act required chief executive officers to sign a statement verifying the accuracy of the company’s financial statements. External auditors must examine and report External auditors must examine and report on the company’s internal control system. Learning Objective 2
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 8 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-8 Ethics No regulation can be as effective in ensuring reliability as high ethical standards of accountants. Integrity Trust Reliabilit y
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 9 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-9 Service and Nonprofit Organizations ServiceorganizationsNonprofitorganizations Accounting firms Law firms Real estate firms BanksHotelsHospitalsSchoolsLibrariesMuseums Government agencies
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 10 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-10 Cost-Benefit and Behavioral Considerations Cost-benefitbalanceBehavioralimplications Weigh estimated costs against probable benefits. The system must provide accurate, timely budgets and performance reports in a form useful to managers. useful to managers. Managers must use accounting reports, or the reports create no benefits. Learning Objective 3
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 11 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-11 Decision Making Decision making: the purposeful choice from among a set of alternative courses of action designed to achieve some objective. Planning: Setting objectives and outlining how the objectives will be obtained. Control: Implementing plans and using feedback to evaluate the attainment of objectives.
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 12 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-12 The Nature of Planning and Controlling PlanningIncreaseProfitabilityPlanningIncreaseProfitability Control – Actions – Evaluations Control – Actions – Evaluations Corrections and revisions of plans and actions Budgets,SpecialReportsBudgets,SpecialReports AccountingSystemAccountingSystem PerformanceReportsPerformanceReports CustomersurveysCustomersurveys CompetitoranalysisCompetitoranalysis AdvertisingimpactAdvertisingimpact New items report report Internal Accounting System Management Process Other information systems Learning Objective 4
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 13 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-13 Budget and Performance Reports Budget: quantitative expression of a plan of action Performance reports: compare actual results with budgeted amounts provide feedback by comparing results with plans highlight variances Variances: deviations from plans
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 14 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-14 Performance Reports Budget Actual Variance Budget Actual Variance Sales$50,000$50,0000 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 U= Unfavorable – actual exceeds budget F – Favorable – actual is less than budget. Mayfair Starbucks Store, March 31, 20X7
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 15 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-15 Product Life Cycle Product life cycle refers to the various stages through which a product passes. No Sales ProductDevelopment Sales Growth Sales Growth Introduction to Market Introduction to Market Stable Sales Level Mature Market Mature Market Low sales No sales Phase-outProduct
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 16 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-16 The Value Chain CustomerFocusCustomerFocus ResearchandDevelopmentResearchandDevelopment ProductAndServiceProcessDesignProductAndServiceProcessDesign ProductionProduction MarketingMarketing DistributionDistribution ServiceService
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 17 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-17 Management Accountant’s Role as Internal Consultant Preparesstandardizedreports Collects and compiles information Interprets and Analyzes information Is Involved In decision making InternalConsultant Management Learning Objective 5
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 18 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-18 Organizational Authority and Responsibility Line managers: directly involved with making and selling products or services. Staff managers: Advisory – Support line managers. Cross-functional teams: Found in modern, “flatter” organizations; Functional areas work together In decision making process.
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 19 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-19 Accounting Function Planning for control Reporting and interpreting Evaluating and consulting Tax administration Government reporting Protection of assets Economic appraisal Planning for control Reporting and interpreting Evaluating and consulting Tax administration Government reporting Protection of assets Economic appraisal Treasurer Functions Provision of capital Investor relations Short-term financing Banking and custody Credits and collections Investments Risk management (insurance) Provision of capital Investor relations Short-term financing Banking and custody Credits and collections Investments Risk management (insurance) Controller Functions Chief Financial Officer (CFO) Learning Objective 6
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 20 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-20 Career Opportunities in Management Accounting The Certified Management Accountant (CMA) CMAs must pass a four-part examination: 1.Business Analysis 2.Management accounting and reporting 3.Strategic Management, and 4. Business Applications. Learning Objective 7
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 21 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-21 Management Accounting Change Drivers Shift from a manufacturing-based to a service-based economy Increased global competition Advances in technology Changes in business processes Learning Objective 8
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 22 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-22 Major Influences on Management Accounting Business process reengineering: Just-in-time (JIT) philosophy Lean manufacturing Computer-integrated manufacturing Six sigma Advances in technology: E-commerce Enterprise resource planning (ERP)
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 23 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-23 Standards of Ethical Conduct The Institute of Management Accountants (IMA) Statement of Ethical Professional Practice for Management Accounting Members Requires members to adhere to a code of conduct regarding: Competence, Competence, Confidentiality, Confidentiality, Integrity, and Integrity, andCredibility. The Institute of Management Accountants (IMA) Statement of Ethical Professional Practice for Management Accounting Members Requires members to adhere to a code of conduct regarding: Competence, Competence, Confidentiality, Confidentiality, Integrity, and Integrity, andCredibility. Learning Objective 9
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 24 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-24 Ethical Dilemmas Managers must choose an alternative and there are: s Significant value conflicts among differing interests. s Real alternatives that are all justifiable, and s Significant consequences on stakeholders in the situation.
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 25 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-25 Unethical Behavior Temptations 4. Accounting rules Avoid creative interpretations of the rules. Practice full and fair disclosure to convey company’s performance. 1. Emphasis on short-term results: Pressure to meet expected profit numbers. 2. Ignoring the small stuff: Large misdeeds often result from many small ones. 3. Economic cycles: A downturn market can reveal what an upturn market conceals. Vigilance in all stages of economic markets maintains high ethical standards.
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©2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton 1 - 26 ©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-26 The End End of Chapter 1
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