8/2/2019 Hilton 1e Ch 01

1/24

2010 McGraw-Hill Ryerson Ltd. 1

Chapter 1

The ChangingRole of Managerial

Accounting

8/2/2019 Hilton 1e Ch 01

2/24

8/2/2019 Hilton 1e Ch 01

3/24

2010 McGraw-Hill Ryerson Ltd. 3

Learning Objectives (cond)

4. Explain the major differences betweenmanagerial and financial accounting.

5. Explain where managerial accountants arelocated in an organization, in terms of formalorganization, deployment in cross-functionalteams, and physical location.

6. Describe the roles of an organization's chief financial officer (CFO) or controller, treasurer,and internal auditor.

8/2/2019 Hilton 1e Ch 01

4/24

2010 McGraw-Hill Ryerson Ltd. 4

Learning Objectives (cond)

7. Briefly describe some of the majorcontemporary themes in managerialaccounting.

8. Understand and explain the concepts of strategic cost management and the value chain.

9. Understand the ethical responsibilities of a managerialaccountant.

10. Discuss the professional organizations, certificationprocess, and ethical standards in the field of managerial accounting.

8/2/2019 Hilton 1e Ch 01

5/24

2010 McGraw-Hill Ryerson Ltd. 5

Managerial accounting is the process of

identifyingmeasuringanalyzinginterpretingcommunicating information

in pursuit of organizational goals.

Learning Objective 1

Define Managerial Accounting

8/2/2019 Hilton 1e Ch 01

6/24

2010 McGraw-Hill Ryerson Ltd. 6

Learning Objective 2Managing Resources, Activities, and

People

An organization . . .

Acquires Resources

Hires People

Organized setof activities

DecisionMaking

Planning

Directing

Controlling

8/2/2019 Hilton 1e Ch 01

7/24

2010 McGraw-Hill Ryerson Ltd. 7

Learning Objective 3How Managerial Accounting Adds Value

to the OrganizationProviding information for decision making andplanning.

Assisting managers in directing and controllingactivities.Motivating managers and other employeestowards organizations goals. Measuring/evaluating performance of subunits,activities, managers, and other employees.

Assessing the organizations competitiveposition.

8/2/2019 Hilton 1e Ch 01

8/24

2010 McGraw-Hill Ryerson Ltd. 8

Learning Objective 4Managerial versus Financial Accounting

Accounting System(accumulates financial and

managerial accounting data in thecost accounting system)

Managerial AccountingInformation for decisionmaking, planning, and

controlling anorganizations operations.

Financial AccountingPublished financial

statements and other

financial reports.

Internal

Users

ExternalUsers

8/2/2019 Hilton 1e Ch 01

9/24

2010 McGraw-Hill Ryerson Ltd. 9

Managerial versus Financial Accounting (cond)

Managerial Accounting Financial AccountingUsers of InformationManagers, within the organization. Interested parties, outside the organization.

RegulationNot required and unregulated, since it is intendedonly for management.

Required and must conform to generally acceptedaccounting principles. Regulated by theAccounting Standards Board of the CanadianInstitute of Chartered Accountants(CICA), and, to

a lesser degree, by Canada's provincial andterritorial.securties regulators.Source of DataThe organization's basic accounting system, plus

various other sources, such as rates of effectiveproducts manufactured, physical quantities of material and labor used in production, occupancyrates in hotels and hospitals, and average take-off delays in airlines.

Almost exclusively drawn from the organization'sbasic accounting system, which accumulatesfinancial information.

Nature of Reports andProcedures

Reports often focus on subunits within theorganization, such as departments, divisions,geographical regions, or product lines. Based ona combination of historical data, estimates, andprojections of future events.

Reports focus on the enterprise in its entirety.Based almost exclusively on historical transactiondata.

LO-4

8/2/2019 Hilton 1e Ch 01

10/24

2010 McGraw-Hill Ryerson Ltd. 10

A staff position supportsand assists line positions.

Example: A costaccountant in themanufacturing plant.

Learning Objective 5Line and Staff Positions

A line position is directlyinvolved in achieving thebasic objectives of anorganization.

Example: A production supervisor ina manufacturing plant.

8/2/2019 Hilton 1e Ch 01

11/24

2010 McGraw-Hill Ryerson Ltd. 11

Management Accountants

An accountant in a accounting firm wouldbe in a line position, because theorganization's mission is providingaccounting services. In contrast, anaccountant at a university would be in a

staff position.

LO-5

8/2/2019 Hilton 1e Ch 01

12/24

2010 McGraw-Hill Ryerson Ltd. 12

Management Accountants

(cond) More and more, managerial accountantswork throughout an entire enterprise andare deployed in cross-functionalmanagement teams, working with topexecutives and personnel from a variety of

functional areas (e.g., marketing,production, engineering, and operations).

LO-5

8/2/2019 Hilton 1e Ch 01

13/24

2010 McGraw-Hill Ryerson Ltd. 13

Learning Objective 6

ControllerThe chief managerial and financialaccountant responsibility for:

Supervising accounting personnelPreparation of information and reports,managerial and financial

Analysis of accounting information

Planning and decision making

8/2/2019 Hilton 1e Ch 01

14/24

2010 McGraw-Hill Ryerson Ltd. 14

Treasurer

Responsible for raising capital andsafeguarding the organizations assets.

Manages investmentsEstablishes credit policiesManages insurance coverage

LO-6

8/2/2019 Hilton 1e Ch 01

15/24

2010 McGraw-Hill Ryerson Ltd. 15

Internal Auditor

Responsible for reviewing accountingprocedures, records, and reports in both thecontrollers and the treasurers area of responsibility.

Expresses an opinion to topmanagement regarding theeffectiveness of the

organizations accounting system.

LO-6

8/2/2019 Hilton 1e Ch 01

16/24

2010 McGraw-Hill Ryerson Ltd. 16

Learning Objective 7Major Themes in Managerial Accounting

ManagerialAccounting

Informationand Incentives

Costs andBenefits

Evolution andAdaptation

BehavioralIssues

8/2/2019 Hilton 1e Ch 01

17/24

2010 McGraw-Hill Ryerson Ltd. 17

Evolution and Adaptation inManagerial Accounting

E-Business

Service vs.Manufacturing

FirmsEmergence ofNewIndustriesGlobalization

Focus on theCustomer

Cross-Functional Teams

Product LifeCyclesand DiversityTime-Based

CompetitionInformation andCommunication

Technology

Just-in-Time Inventory

Total Quality Management

ContinuousImprovement

Change

LO-7

Computer-IntegratedManufacturing

8/2/2019 Hilton 1e Ch 01

18/24

2010 McGraw-Hill Ryerson Ltd. 18

ObjectivesMeasure the costof resourcesconsumed.Identify andeliminate non-

value-added costs .

Cost Management Systems

CostManagement

System

LO-7

8/2/2019 Hilton 1e Ch 01

19/24

2010 McGraw-Hill Ryerson Ltd. 19

ObjectivesDetermine efficiencyand effectiveness of

major activities.Identify and evaluatenew activities thatcan improve

performance.

Cost Management Systems (cond)

CostManagement

System

LO-7

8/2/2019 Hilton 1e Ch 01

20/24

2010 McGraw-Hill Ryerson Ltd. 20

ProductDesign

Researchand

Development

Learning Objective 8Strategic Cost Management and the

Value Chain

Securing raw

materials andother resources

Production

Marketing

Distribution

SalesStart

8/2/2019 Hilton 1e Ch 01

21/24

2010 McGraw-Hill Ryerson Ltd. 21

Theory of Constraints

A sequential process of identifying andremoving constraints in a system.

Restrictions or barriers that impedeprogress toward an objective

LO-8

8/2/2019 Hilton 1e Ch 01

22/24

2010 McGraw-Hill Ryerson Ltd. 22

Learning Objective 9

Ethical Climate of BusinessThe corporate scandals experienced over the lastfew years have shown us that unethical behaviorin business is wrong in a moral sense and can be

disastrous in the economy. There will likely bemore reforms in corporate governance and

accounting in the future.

b

8/2/2019 Hilton 1e Ch 01

23/24

2010 McGraw-Hill Ryerson Ltd. 23

Learning Objective 10

Managerial Accounting as a Career

Professional Organizations

Society of Management Accountants of Canada(CMA)

Canadian Institute of Management

Accountants (CA)

Certified General Accountants Association of Canada (CGA)

8/2/2019 Hilton 1e Ch 01

24/24