Introduction to
Managerial Accounting
Chapter 1

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1

Objective 1
Identify managers’ three primary responsibilities Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

2

Managers’ Responsibilities
Planning

Decision
Making

Setting goals and objectives Directing

Overseeing day-to-day operations Controlling

Evaluating results of operations

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

3

Planning
• Setting goals and objectives and how to achieve them
• Examples of planning
– Generate more sales via opening new stores
– Reduce labor costs by reducing store hours

• Budgets
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4

Directing
• Overseeing company’s day-to-day operations
• Examples
– Using daily/weekly sales reports to adjust marketing strategies
– Using product cost reports to adjust raw material usage

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

5

Controlling
• Evaluating results of operations against plans and making adjustments as needed
• Examples
– Comparing budgeted sales with actual sales to take corrective actions
– Comparing budgeted product costs against actual product costs to take corrective actions

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

6

Objective 2
Distinguish financial accounting from managerial accounting

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

7

Managerial vs. Financial Accounting
Issue

Managerial

Financial

Primary users

Internal

External

Purpose of information Plan, direct, control, decide

Users make investing and lending decisions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

8

Managerial vs. Financial Accounting
Issue

Managerial

Financial

Primary accounting product

Internal reports useful to management General purpose financial statements

What is included? Defined by management Determined by
GAAP

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

9

Managerial vs. Financial Accounting
Issue

Managerial

Underlying basis of information

Emphasis

Financial

Internal and external transactions, focus on future

Based on historical transactions with external parties

Data must be relevant Data must be reliable and objective Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

10

Managerial vs. Financial Accounting
Issue

Managerial

Financial

Business unit

Segments of the business Company as a whole Preparation

Depends on management needs

Annually and quarterly Verification

Internal audit

External audit

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11

Managerial vs. Financial Accounting
Issue

Managerial

Financial

Information requirements No requirement

SEC requires publicly traded companies to issue audited financial statements

Impact on employee behavior

Careful consideration Adequacy of disclosure Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

12

Objective 3
Describe organizational structure and the roles and skills required of management accountants within the organization

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

13

Organizational Structure
Board of
Directors
Audit
Committee
Chief Executive
Officer

Chief Operating
Officer
Vice Presidents of Various
Operations

Chief Financial
Officer

Treasurer

Controller

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Internal Audit

14

Changing Roles of Management
Accountants
• Impact of technology
• Ensuring accurate financial records
• Planning, analyzing, and interpreting accounting data
• Providing decision support

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

15

Required Skills of Managerial Accountants
• Knowledge of financial and managerial accounting • Analytical skills