Chapter 1 Managerial Accounting Overview

Managerial accounting provides information to managers for use within the organization (internal
users).
Financial accounting reports financial information to external parties.

Comparison of Financial and Managerial Accounting: (textbook page 2)

Segment part or activity of an organization about which managers would like cost, revenue, or profit
data.
- Product lines, customer groups, territories, divisions, plants, departments

Managerial accounting helps managers perform three important activities:

- Planning establishing goals and specifying how to achieve them
o Budget detailed plan for the future that is usually expressed by numbers
 - Controlling gathering feedback to ensure the plan is properly executed or being modified
as circumstances change
o Performance report compares budgeted data to actual data to identify and learn
from good performance and to eliminate sources of bad performance
- Decision making selecting a course of action from alternatives
o most basic managerial skill is ability to make intelligent, data-driven decisions
What should we be selling?
Who should we be serving?
How should we execute?

Why does Managerial accounting matter to your career?

Institute of Management Accountants (IMA) estimate 80% of professional accountants in the US work
in nonpublic accounting

Public accountants need strong financial accounting background. Managerial accountants need both
financial and planning, controlling, decision-making skills.

Certifications can increase credibility, your career mobility, and compensation:

Certified Management Accountant (CMA) focuses on planning, controlling, decision-making skills
Certified Public Accountant (CPA) focuses on rule-based compliance, financial accounting standards,
business law, tax code
6 basic management perspectives need more than numbers to enable intelligent planning, control and
decision making:
- Ethics perspective to maintain high ethical responsibilities
o Maintain high level of professional competence
o Teat sensitive mattes with confidentiality
o Maintain personal integrity
o Disclose information in a credible fashion
- Strategic management perspective - having a strategy
o a game plan that enables a company to attract customers and set itself apart from
competitors
- Enterprise risk management perspective
o process used by a company to identify risks and develop responses to ensure goals
will still be met
- Corporate Social Responsibility perspective
o Responsibility not only for producing financial results, but also other stakeholders
such as:
Customers safe, high-quality products, full disclosure of product-related
risks
Suppliers fair contract terms and prompt payments
Stockholders access to complete and accurate financial info, full disclosure
of risks
Employees safe and human working conditions, fair compensation
Communities payment of taxes, honest info about corporate plans
Environments greenhouse gas emission data, recycling
- Process Management perspective
o Business processes serve the needs of a companys most important stakeholders
its customers, so managers have to work together, across departments to achieve a
task
Business process series of steps that are followed in order to carry out
some task in a business
Value chain the major business functions that add value to a companys
products and services
- Leadership perspective the ability to unite behaviors, diverse needs, beliefs and goals of
their fellow employees to pursue strategic goals and make optimal decisions.
o Intrinsic motivation motivation that comes from within us
o Extrinsic incentives giving things to employees to motivate them when a goal is
achieved (bonus structure, employee appreciation party)
o Cognitive bias leaders must be aware that all people (including themselves)
possess a cognitive bias, or distorted thought process, that can adversely affect
planning, controlling, decision making.