1. Copyright ©2008 Prentice Hall. All rights reserved 1-1 Introduction to Managerial Accounting Chapter 1

2. Copyright ©2008 Prentice Hall. All rights reserved 1-2 Objective 1 Identify managers’ four primary responsibilities

3. Copyright ©2008 Prentice Hall. All rights reserved 1-3 Setting goals and objectives Overseeing day-to- day operations Evaluating results of operations Managers’ Responsibilities Directing Controlling Decision Making Planning

4. Copyright ©2008 Prentice Hall. All rights reserved 1-4 Objective 2 Distinguish financial accounting from managerial accounting

5. Copyright ©2008 Prentice Hall. All rights reserved 1-5 Managerial vs Financial Accounting IssueManagerialFinancial Primary UsersInternalExternal Purpose of Information Plan, Direct, Control, Decide Users make investing and lending decisions

6. Copyright ©2008 Prentice Hall. All rights reserved 1-6 Managerial vs Financial Accounting IssueManagerialFinancial Primary Accounting Product Internal Reports useful to Management General Purpose Financial Statements What is included? Defined by Management Determined by GAAP

7. Copyright ©2008 Prentice Hall. All rights reserved 1-7 Managerial vs Financial Accounting IssueManagerialFinancial Underlying Basis of Information Internal and External Transactions, focus on future Based on historical transactions with external parties EmphasisData must be relevant Data must be reliable and objective

8. Copyright ©2008 Prentice Hall. All rights reserved 1-8 Managerial vs Financial Accounting IssueManagerialFinancial Business UnitSegments of the business Company as a whole PreparationDepends on management needs Annually and Quarterly VerificationInternal auditExternal audit

9. Copyright ©2008 Prentice Hall. All rights reserved 1-9 Managerial vs Financial Accounting IssueManagerialFinancial Information Requirements No requirementSEC requires publicly traded companies to issue audited financial statements Impact on employee behavior Careful consideration Adequacy of disclosure

10. Copyright ©2008 Prentice Hall. All rights reserved 1-10 E1-10 a.Companies must follow GAAP in their ____________________ systems. b.Financial accounting develops reports for external parties, such as __________ and _______________. c.When managers evaluate the company’s performance compared to the plan, they are performing the __________ role of Management. financial accounting controlling What type of users outside of the company might utilize financial information?

11. Copyright ©2008 Prentice Hall. All rights reserved 1-11 E1-10 d.__________ are decision makers inside a company. e.___________________ provides information on a company’s past performance to external parties. f.______________________ systems are not restricted by GAAP but are chosen by comparing the costs versus the benefits of the system. Managers Financial accounting Managerial accounting

12. Copyright ©2008 Prentice Hall. All rights reserved 1-12 E1-10 g.Choosing goals and the means to achieve them is the __________ function of management. h._____________________ systems report on various segments or business units of the company. i.____________________ statements of public companies are audited annually by CPAs. planning Managerial accounting Financial accounting

13. Copyright ©2008 Prentice Hall. All rights reserved 1-13 Objective 3 Describe organizational structure and the roles and skills required of management accountants within the organization

14. Copyright ©2008 Prentice Hall. All rights reserved 1-14 Organizational Structure Audit Committee Audit Committee

15. Copyright ©2008 Prentice Hall. All rights reserved 1-15 Changing Roles of Management Accountants Ensuring accurate financial records  Helping to design information systems  Recording non-routine transactions  Making adjustments to financial records Planning, analyzing, and interpreting accounting data Providing decision support

16. Copyright ©2008 Prentice Hall. All rights reserved 1-16 Required Skills Knowledge of financial and managerial accounting Analytical skills Knowledge of how a business functions Ability to work on a team Oral and written communications skills

17. Copyright ©2008 Prentice Hall. All rights reserved 1-17 E1-11 a.The _____ and the _____ report to the CEO. b.The internal audit function reports to the CFO or _______ and the _____________. c.The __________ is directly responsible for financial accounting, managerial accounting, and tax reporting. d.The CEO is hired by the______________. CFOCOO CEO controller audit committee Board of Directors

18. Copyright ©2008 Prentice Hall. All rights reserved 1-18 E1-11 e.The __________ is directly responsible for raising capital and investing funds. f.The __________ is directly responsible for the company’s operations. g.Managerial accountants often work with __________________________. h.The subgroup of the board of directors is called the _________________. treasurer COO audit committee Management accountants have many skills and need to be able to work with all areas in the company.

19. Copyright ©2008 Prentice Hall. All rights reserved 1-19 Objective 4 Describe the role of the Institute of Management Accountants (IMA) and use its ethical standards to make reasonable ethical judgments

20. Copyright ©2008 Prentice Hall. All rights reserved 1-20 IMA Professional association for management accountants Goal  Advance Managerial accounting profession through Certification Practice Development Education Networking Certifications  Certified Management Accountant (CMA)  Certified Financial Managers (CFM)

21. Copyright ©2008 Prentice Hall. All rights reserved 1-21 Summary of Ethical Standards Management Accountants must comply with Four Ethical Standards Maintain Professional COMPETENCE Preserve CONFIDENTIALILTY of Information Uphold INTEGRITYPerform Duties with CREDIBILITY

22. Copyright ©2008 Prentice Hall. All rights reserved 1-22 Steps to Resolve Ethical Dilemmas Follow company’s policies for reporting unethical behavior If not resolved  Discuss with immediate supervisor  Discuss with objective advisor/IMA Ethics counselor  Consult an attorney

23. Copyright ©2008 Prentice Hall. All rights reserved 1-23 E1-13 a.The ______ is the professional association for management accountants. b.The institute offers two types of certification – the _____ and _____. c.The __________ exam focuses on managerial accounting topics, economics, and business finance. IMA CMACFM CMA

24. Copyright ©2008 Prentice Hall. All rights reserved 1-24 E1-13 d.The ______ exam focuses on financial statement analysis, business valuation, risk management, working capital policy, and capital structure. e.The institute’s monthly publication, called ________________, addresses current topics of interest to management accountants. CFM Strategic Finance CFM

25. Copyright ©2008 Prentice Hall. All rights reserved 1-25 E1-13 f. The institute says that approximately _____ percent of accountants work inside of organizations, rather than at CPA firms. 85

26. Copyright ©2008 Prentice Hall. All rights reserved 1-26 Objective 5 Discuss trends in the business environment

27. Copyright ©2008 Prentice Hall. All rights reserved 1-27 CEO and CFO - responsible for financial statements, internal control system, procedures for financial reporting Audit committee – independent and should include a financial expert CPA firms – limited non-audit services for audit clients and periodic quality review Stiffer penalties for white-collar crimes Sarbanes-Oxley Act of 2002

28. Copyright ©2008 Prentice Hall. All rights reserved 1-28 Current Trends Shifting economy Competing in global marketplace Time-based competition  Advanced Information Systems  E-Commerce  Just-in-Time Management Total Quality Management ISO Certification Cost Benefit Analysis

29. Copyright ©2008 Prentice Hall. All rights reserved 1-29 Objective 6 Use cost-benefit analysis to make business decisions

30. Copyright ©2008 Prentice Hall. All rights reserved 1-30 E1-18 1. What are the total costs of adopting JIT? Employee training $13,500 Streamline production process 37,000 Supplier identification 8,000 Total costs$58,500

31. Copyright ©2008 Prentice Hall. All rights reserved 1-31 E1-18 2. What are the total benefits of adopting JIT? Savings in warehouse expenses$97,000 Lower spoilage costs 46,000 Total benefits$143,000

32. Copyright ©2008 Prentice Hall. All rights reserved 1-32 E1-18 3. Should Wild Rides adopt JIT? Why or why not? Expected total benefits$143,000 Expected total costs(58,500) Excess of benefits over costs$ 84,500 Wild Rides should adopt JIT because the expected benefits exceed the costs.

33. Copyright ©2008 Prentice Hall. All rights reserved 1-33 End of Chapter 1