Chapter

Chapter11

Managerial
Managerial Accounting,
Accounting, the
the
Business
Business Organization,
Organization, and
and
Professional
Professional Ethics
Ethics

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 Users of Accounting Information

Management Financial
Accounting Accounting

Develops
Process of identifying, information for
measuring, accumulating, external decision
analyzing, preparing, makers:
interpreting, and
communicating
information used by: Stockholders,
Suppliers,

Managers Banks, Government

Authorities
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Management Accounting and Your Career

The Certified Management Accountant (CMA)

CMAs must pass an examination covering

(1)Financial planning, performance

and control, and

(2) Financial decision making.

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 Roles of Accounting Information

Scorekeeping:
Evaluate
organizational
performance Attention Directing:
Compare actual
results to expected

Problem Solving:
Assess possible
courses of action

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The Nature of Planning and Controlling

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 Learning
Objective 3 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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 Performance Reports

Mayfair Starbucks Store, March 31, 20X1

Budget Actual Variance

Sales $50,000 $50,000 0
Less:
Ingredients 22,000 24,500 $2,50
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,
Operating income $ 5,500 $ 3,350 $2,

U= Unfavorable actual exceeds budget

F Favorable actual is less than budget

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 Influences on Accounting Systems

Generally accepted accounting principles (GAAP)

Foreign Corrupt Practices Act

Internal controls

Internal auditors Sarbanes-Oxley Act

Management audits

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 Sarbanes-Oxley Act

In 2002, the Sarbanes-Oxley Act required

chief executive officers to sign a
statement verifying the accuracy of
the companys financial statements.

External auditors must examine and report

on the companys internal control system.

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 Learning Cost-Benefit and Behavioral
Objective 4
Considerations
Cost-benefit Behavioral
balance implications

The system must provide accurate, timely budgets

and performance reports in a form useful to managers.

Managers must use accounting

Weigh estimated
reports, or the reports
costs against
create no benefits.
probable benefits.

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 Product Life Cycle

Product life cycle refers to the various

stages through which a product passes.

No Sales Sales Growth Stable Sales Level Low sales No sales

Product Introduction Phase out

Development to Market Mature Market Product

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 Learning
Objective 5 The Value Chain

Product
Research
Research And
and
and Service
Customer Development
Development or
Service Process
Design

Customer
Focus

Distribution Production
Marketing

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Accountings Position in the Organization

Management accountants role as consultant

Collects Prepares
and compiles standardized
information reports

Interprets and Is involved

analyzes information in decision making

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 Line and Staff Authority

Line managers:
directly involved with Staff managers: Advisory
making and selling support line managers.
products or services.

Cross-functional teams: Found in

modern, flatter organizations;
Functional areas work together
in decision-making process.

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 Controller and Treasurer Function

Chief Financial Officer (CFO)

Controller Functions Treasurer Functions

Provision of capital
Planning for control
Investor relations
Reporting and interpreting
Short-term financing
Evaluating and consulting
Banking and custody
Tax administration
Credits and collections
Government reporting
Investments
Protection of assets
Risk management
Economic appraisal
(insurance)
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 Learning Current Trends in
Objective 6
Management Accounting
Adaption to changes:

Shifting from a manufacturing-based

to a service-based economy

Increased global competition

Advances in technology

Changes in business processes

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 Current Trends in Management
Accounting

The service sector now accounts for more

than 80% of the employment in the United
States.

Common characteristics of service

organizations
1. Labor is a major component of costs.
2. Output is usually difficult to measure.
3. Service organizations cannot store their
major inputs and outputs.

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Major Influences on Management
Accounting

Advances in technology:
E-commerce
Enterprise resource planning (ERP)
B2C and B2B

Business process reengineering:

Just-in-time (JIT) philosophy
Lean manufacturing
Computer-integrated manufacturing
Six sigma

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 Learning
Objective 7 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,
Confidentiality,
Integrity, and
Credibility.

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 Ethics

Reliability

Trust Integrity

No regulation can be as effective

in ensuring reliability as high
ethical standards of accountants.

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 Ethical Dilemmas

Managers must choose an alternative

and there are:
Significant value conflicts among
differing interests.
Real alternatives that are all
justifiable, and
Significant consequences on
stakeholders in the situation.

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 Unethical Behavior Temptations

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: Downturn markets reveal what an
upturn market conceals. Vigilance in all stages of
economic markets maintains high ethical standards.
4. Accounting rules:
Avoid creative interpretations of the rules. Practice
full and fair disclosure to convey companys
performance.

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