The Changing Role of

Managerial Accounting in a Dynamic Business Environment

LEARNING OBJECTIVES
 is the process of identifying, measuring,
analyzing, interpreting,and
communicating information in pursuit of
an organization’s goals

Managerial
accounting Managerial accounting is an integral part
of the management process,

and managerial accountants are

important strategic partners in an
organization’s management team
 Managerial accountants are specialists in using the tools
of managerial accountingto help the organization and its
managers run the operation effectively

MANAGERI
AL The role of the accountant in leading-edge
companies “has beenThe role of the

ACCOUNTA accountant in leading-edge companies “has

been transformed from number cruncher and
financial historian to
NT .
being business partner and trusted advisor.
And the tools of managerial accounting are
used by all managers
 Managing Resources, Activities, and
People
An organization . . .
Directing

Acquires Resources Decision

Organized
Organized setset Making
of
of activities
activities

Controlling Planning
Hires People
1-5
How Managerial Accounting Adds
Value to the Organization
•• Providing
Providing information
information for
for decision
decision making
making andand
planning.
planning.
•• Assisting
Assisting managers
managers in
in directing
directing and
and controlling
controlling
activities.
activities.
•• Motivating
Motivating managers
managers and
and other
other employees
employees towards
towards
organization’s
organization’s goals.
goals.
•• Measuring
Measuring performance
performance ofof subunits,
subunits, activities,
activities,
managers,
managers, andand other
other employees.
employees.
•• Assessing
Assessing the
the organization’s
organization’s competitive
competitive position.
position.

1-6
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?
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Financial accounting and managerial accounting
Managerial versus Financial Accounting
Accounting
Accounting System
System
(accumulates
(accumulates financial
financial and
and
managerial
managerial accounting
accounting data
data in
in the
the
cost
cost accounting
accounting system)
system)

Managerial
Managerial Accounting
Accounting Financial
Financial Accounting
Accounting
Information
Information for
for decision
decision Published
Published financial
financial
making,
making, planning,
planning, and
and statements
statements andand other
other
controlling
controlling an
an financial
financial reports.
reports.
organization’s
organization’s
operations.
operations.
Internal External
Users Users 1-9
Managerial versus Financial Accounting

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Line and Staff Positions
•• AA line
line position
position isis directly
directly •• AA staff
staff position
position supports
supports andand
involved
involved inin achieving
achieving thethe basic
basic assists
assists line
line positions.
positions.
objectives
objectives ofof an
an organization.
organization. •• Example:
Example: AA costcost
•• Example:
Example: AA production
production accountant
accountant in in the
the
supervisor
supervisor inin aa manufacturing
manufacturing plant.plant.
manufacturing
manufacturing plant.plant.

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Managerial Accounting as a Career
Professional Organizations

Institute of Management Accountants (IMA)

Develops
Develops
Publishes
Publishes Administers
Administers Standards
Standards of
of
Management
Management Certified
Certified Ethical
Ethical
Accounting
Accounting Management
Management Conduct
Conduct for
for
and
and research
research Accountant
Accountant Management
Management
studies.
studies. program
program Accountants
Accountants
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Controller
The
The chief
chief managerial
managerial and and financial
financial accountant
accountant
responsibility
responsibility for:
for:
•• Supervising
Supervising accounting
accounting personnel
personnel
•• Preparation
Preparation ofof information
information and
and reports,
reports, managerial
managerial and
and
financial
financial
•• Analysis
Analysis of
of accounting
accounting information
information
•• Planning
Planning and
and decision
decision making
making

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

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Internal Auditor
Responsible
Responsible forfor reviewing
reviewing accounting
accounting procedures,
procedures, records,
records, and
and
reports
reports in
in both
both the
the controller’s
controller’s and
and the
the treasurer’s
treasurer’s area
area of
of
responsibility.
responsibility.
•• Expresses
Expresses anan opinion
opinion to
to top
top
management
management regarding
regarding the
the
effectiveness
effectiveness of of the
the
organizations
organizations accounting
accounting
system.
system.

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Major Themes in Managerial Accounting

Behavioral
Behavioral Costs
Costs and
and
Issues
Issues Benefits
Benefits

Information
Information Evolution
Evolution and
and
and
and Incentives
Incentives Adaptation
Adaptation

Managerial
Accounting
1-16
Evolution and Adaptation in Managerial
Accounting
E-Business Product Life Cycles

Service vs. Time-Based

Manufacturing Firms Competition

Change Information and

Emergence of New Communication
Industries Technology

Global Competition Just-in-Time Inventory

Focus on the Customer Total Quality Management

Cross-Functional Teams Continuous Improvement 1-17

Cost Management Systems
Objectives
Objectives

Measure
Measure the
the cost
cost of
of
resources
resources consumed.
consumed.

Identify
Identify and
and eliminate
eliminate
non-value-added
non-value-added costs.
costs.
Cost
Management
System

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Cost Management Systems
Objectives
Objectives
Determine
Determine efficiency
efficiency
and
and effectiveness
effectiveness of of
major
major activities.
activities.
Identify
Identify and
and evaluate
evaluate
new
new activities
activities that
that can
can Cost
Management
improve
improve performance.
performance. System

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Strategic Cost Management and the Value
Chain
Product
Product
Design
Design
Production
Production
Research
Research
and
and
Development
Development Marketing
Marketing
Securing
Securing raw
raw
materials
materials and
and Distribution
Distribution
other
other resources
resources
Customer
Customer
Start Service
Service
1-20
Theory of Constraints
A sequential process of identifying and removing
constraints in a system.

Restrictions
Restrictions or
or barriers
barriers that
that impede
impede
progress
progress toward
toward anan objective
objective

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Professional Ethics

Competence
Confidentiality
Integrity
Credibility

1-22
Ethical Climate of Business
The
The corporate
corporate scandals
scandals experienced
experienced over
over the
the last
last few
few
years
years have
have shown
shown us us that
that unethical
unethical behavior
behavior inin business
business
is
is wrong
wrong inin aa moral
moral sense
sense and
and can
can be
be disastrous
disastrous inin the
the
economy.
economy. In In addition
addition toto Sarbanes-Oxley,
Sarbanes-Oxley, there
there will
will
likely
likely be
be more
more reforms
reforms inin corporate
corporate governance
governance andand
accounting.
accounting.

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End of Chapter 1

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