1. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Chapter 1
The Changing Role
of Managerial
Accounting in a
Dynamic Business
Environment

2. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
1

3. Managerial accounting is the process of
 Identifying
 Measuring
 Analyzing
 Interpreting
 Communicating information
Define Managerial AccountingDefine Managerial Accounting

4. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
2

5. Managing Resources, Activities,Managing Resources, Activities,
and Peopleand People
An organization . . .
Acquires Resources
Hires People
Organized setOrganized set
of activitiesof activities
Organized setOrganized set
of activitiesof activities
Decision
Making
Decision
Making
PlanningPlanning
DirectingDirecting
ControllingControlling

6. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
3

7. How Managerial AccountingHow Managerial Accounting
Adds Value to the OrganizationAdds Value to the Organization
• Providing information for decision making and
planning.
• Assisting managers in directing and controlling
activities.
• Motivating managers and other employees
towards organization’s goals.
• Measuring performance of subunits, activities,
managers, and other employees.
• Assessing the organization’s competitive position.
• Providing information for decision making and
planning.
• Assisting managers in directing and controlling
activities.
• Motivating managers and other employees
towards organization’s goals.
• Measuring performance of subunits, activities,
managers, and other employees.
• Assessing the organization’s competitive position.

8. The Balanced ScorecardThe Balanced Scorecard
Financial Perspective
Goals Measures
Customer Perspective
Goals Measures
Operations Perspective
Goals Measures
Innovation Perspective
Goals Measures
How do we lookHow do we look
to owner’s?to owner’s?
How do customersHow do customers
see us?see us?
How can weHow can we
continue tocontinue to
improve?improve?
In which activitiesIn which activities
must we excel?must we excel?

9. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
4

10. Managerial versus FinancialManagerial versus Financial
AccountingAccounting
Accounting SystemAccounting System
(accumulates financial and(accumulates financial and
managerial accounting data in themanagerial accounting data in the
cost accounting system)cost accounting system)
Accounting SystemAccounting System
(accumulates financial and(accumulates financial and
managerial accounting data in themanagerial accounting data in the
cost accounting system)cost accounting system)
Managerial AccountingManagerial Accounting
Information for decisionInformation for decision
making, planning, andmaking, planning, and
controlling ancontrolling an
organization’sorganization’s
operations.operations.
Managerial AccountingManagerial Accounting
Information for decisionInformation for decision
making, planning, andmaking, planning, and
controlling ancontrolling an
organization’sorganization’s
operations.operations.
Financial AccountingFinancial Accounting
Published financialPublished financial
statements and otherstatements and other
financial reports.financial reports.
Financial AccountingFinancial Accounting
Published financialPublished financial
statements and otherstatements and other
financial reports.financial reports.
InternalInternal
UsersUsers
ExternalExternal
UsersUsers

11. Managerial versus FinancialManagerial versus Financial
AccountingAccounting
Managerial Accounting Financial Accounting
Users of Information Managers, within the organization. Interested parties, outside the organization.
Regulation Not required and unregulated, since it is intended
only for management.
Required and must conform to generally accepted
accounting principles. Regulated by the Financial
Accounting Standards Board, and, to a lesser
degree, the Securities and Exchange
Commission.
Source of Data The organization's basic accounting system, plus
various other sources, such as rates of effective
products manufactured, physical quantities of
material and labor used in production, occupancy
rates in hotels and hospitals, and average take-off
delays in airlines.
Almost exclusively drawn from the organization's
basic accounting system, which accumulates
financial information.
Nature of Reports and
Procedures
Reports often focus on subunits within the
organization, such as departments, divisions,
geographical regions, or product lines. Based on a
combination of historical data, estimates, and
projections of future events.
Reports focus on the enterprise in its entirety.
Based almost exclusively on historical transaction
data.

12. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
5

13. • A staff position supports
and assists line positions.
– Example: A cost
accountant in the
manufacturing plant.
• A staff position supports
and assists line positions.
– Example: A cost
accountant in the
manufacturing plant.
Line and Staff PositionsLine and Staff Positions
• A line position is directly
involved in achieving the
basic objectives of an
organization.
– Example: A production
supervisor in a
manufacturing plant.
• A line position is directly
involved in achieving the
basic objectives of an
organization.
– Example: A production
supervisor in a
manufacturing plant.

14. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
6

15. ControllerController
The chief managerial and financial accountant
responsibility for:
– Supervising accounting personnel
– Preparation of information and reports, managerial
and financial
– Analysis of accounting information
– Planning and decision making
The chief managerial and financial accountant
responsibility for:
– Supervising accounting personnel
– Preparation of information and reports, managerial
and financial
– Analysis of accounting information
– Planning and decision making

16. TreasurerTreasurer
Responsible for raising capital and safeguarding the
organization’s assets.
– Supervises relationships with financial institutions.
– Work with investors and potential
investors.
– Manages investments.
– Establishes credit policies.
– Manages insurance coverage
Responsible for raising capital and safeguarding the
organization’s assets.
– Supervises relationships with financial institutions.
– Work with investors and potential
investors.
– Manages investments.
– Establishes credit policies.
– Manages insurance coverage

17. Internal AuditorInternal Auditor
Responsible for reviewing accounting procedures, records,
and reports in both the controller’s and the treasurer’s area
of responsibility.
– Expresses an opinion to top
management regarding the
effectiveness of the
organizations accounting
system.
Responsible for reviewing accounting procedures, records,
and reports in both the controller’s and the treasurer’s area
of responsibility.
– Expresses an opinion to top
management regarding the
effectiveness of the
organizations accounting
system.

18. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
7

19. Major Themes in ManagerialMajor Themes in Managerial
AccountingAccounting
ManagerialManagerial
AccountingAccounting
Information
and Incentives
Information
and Incentives
Costs and
Benefits
Costs and
Benefits
Evolution and
Adaptation
Evolution and
Adaptation
Behavioral
Issues
Behavioral
Issues

20. Evolution and Adaptation inEvolution and Adaptation in
Managerial AccountingManagerial Accounting
E-Business
Service vs.
Manufacturing Firms
Emergence of New
Industries
Global Competition
Focus on the Customer
Cross-Functional Teams
Product Life Cycles
Time-Based
Competition
Information and
Communication
Technology
Just-in-Time Inventory
Total Quality Management
Continuous Improvement
ChangeChange

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

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

23. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
8

24. ProductProduct
DesignDesign
ProductProduct
DesignDesign
ResearchResearch
andand
DevelopmentDevelopment
ResearchResearch
andand
DevelopmentDevelopment
Strategic Cost Management andStrategic Cost Management and
the Value Chainthe Value Chain
Securing rawSecuring raw
materials andmaterials and
other resourcesother resources
Securing rawSecuring raw
materials andmaterials and
other resourcesother resources
ProductionProductionProductionProduction
MarketingMarketingMarketingMarketing
DistributionDistributionDistributionDistribution
CustomerCustomer
ServiceService
CustomerCustomer
ServiceServiceStartStart

25. Theory of ConstraintsTheory of Constraints
A sequential process of identifying andidentifying and
removing constraintsremoving constraints in a system.
Restrictions or barriers that impede
progress toward an objective
Restrictions or barriers that impede
progress toward an objective

26. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
9

27. Ethical Climate of BusinessEthical Climate of Business
The corporate scandals experienced over the last
few years have shown us that unethical behavior
in business is wrong in a moral sense and can be
disastrous in the economy. In addition to
Sarbanes-Oxley, there will likely be more reforms
in corporate governance and accounting.
The corporate scandals experienced over the last
few years have shown us that unethical behavior
in business is wrong in a moral sense and can be
disastrous in the economy. In addition to
Sarbanes-Oxley, there will likely be more reforms
in corporate governance and accounting.

28. Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Learning
Objective
10

29. Managerial Accounting as aManagerial Accounting as a
CareerCareer
Professional Organizations
Institute of Management Accountants (IMA)Institute of Management Accountants (IMA)
PublishesPublishes
Management
Accounting
and researchand research
studies.studies.
PublishesPublishes
Management
Accounting
and researchand research
studies.studies.
AdministersAdministers
Certified
Management
Accountant
programprogram
AdministersAdministers
Certified
Management
Accountant
programprogram
DevelopsDevelops
Standards of
Ethical
Conduct for
Management
Accountants
DevelopsDevelops
Standards of
Ethical
Conduct for
Management
Accountants

30. Professional EthicsProfessional Ethics
CompetenceCompetence
ConfidentialityConfidentiality
IntegrityIntegrity
CredibilityCredibility

31. End of Chapter 1End of Chapter 1