MA_Chapter 1.pptx

Introduction to Management Accounting Seventeenth Edition, Global Edition Chapter 1 Managerial Accounting, the Business Organization, and...

Introduction to Management Accounting Seventeenth Edition, Global Edition Chapter 1 Managerial Accounting, the Business Organization, and Professional Ethics Copyright © 2023 Pearson Education, Ltd. Learning Objectives 1.1 Explain why accounting is essential for decision makers and managers. 1.2 Describe the major users and uses of accounting information. 1.3 Explain the role of budgets and performance reports in planning and control. 1.4 Describe the cost-benefit and behavioral issues involved in designing an accounting system. Copyright © 2023 Pearson Education, Ltd. Learning Objectives 1.5 Discuss the role accountants play in the company’s value-chain functions. 1.6 Identify current trends in management accounting. 1.7 Explain why ethics and standards of ethical conduct are important to accountants. Copyright © 2023 Pearson Education, Ltd. Why Accounting is Essential for Decision Makers and Managers (1 of 3) Accounting information is used in decision making for planning and control. Planning describes how the organization will achieve its objectives. Control is the process of implementing plans and evaluating if objectives are achieved. Copyright © 2023 Pearson Education, Ltd. Users of Accounting Information (2 of 3) Management Accounting – Process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information used by managers Financial Accounting – Develops information for external decision makers like stockholders, suppliers, banks, government authorities Copyright © 2023 Pearson Education, Ltd. Management Accounting and Your Career (3 of 3) The Certified Management Accountant (CMA) must pass an examination covering – Financial planning, performance and control. – Financial decision making. Copyright © 2023 Pearson Education, Ltd. Roles of Accounting Information (1 of 4) Accounting Information System Process of gathering, organizing, and communicating financial information Copyright © 2023 Pearson Education, Ltd. Roles of Accounting Information (2 of 4) Scorekeeping: Evaluate organizational performance Attention Direction: Compare actual results to expected Problem Solving: Assess possible courses of action Copyright © 2023 Pearson Education, Ltd. Planning and Control (3 of 4) Accounting information helps managers plan and control the organization’s operations. – Planning: Setting objectives and outlining how the objectives will be obtained. – Control: Implementing plans and using feedback to evaluate the attainment of objectives. Copyright © 2023 Pearson Education, Ltd. The Nature of Planning and Controlling (4 of 4) Copyright © 2023 Pearson Education, Ltd. Budget and Performance Reports (1 of 2) 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, which are deviations from plans Copyright © 2023 Pearson Education, Ltd. Performance Reports (2 of 2) Budget Actual Variance Sales $50,000 $50,000 $0 Less: Ingredients $22,000 $24,500 $2,500 U Store labor (baristas, etc.) 12,000 11,600 400 F Other labor (managers, 6,000 6,050 50 U supervisors) Utilities, maintenance, etc. 4,500 4,500 0 Total expenses $44,500 $46,650 $2,150 U Total operating income $ 5,500 $ 3,350 $2,150 U U = unfavorable - actual cost greater than budgeted; actual revenue or profit less than budgeted F = favorable - actual cost less than budgeted; actual revenue or profit greater than budgeted Exhibit 1-3 Mayfair Starbucks Store—Performance Report for the Month Ended March 31, 20X1 U or F???? Rule of thumb: Think about what you would prefer as a manager!!! Copyright © 2023 Pearson Education, Ltd. Cost-Benefit and Behavioral Considerations (1 of 2) Cost-benefit balance – Weigh estimated costs against probable benefits. Behavioral implications – Managers must use accounting reports, or the reports create no benefits. The system must provide accurate, timely budgets and performance reports in a form useful to managers. Copyright © 2023 Pearson Education, Ltd. Product Life Cycle (2 of 2) Product life cycle refers to the various stages through which a product passes. Exhibit 1-4 Typical Product Life Cycle Copyright © 2023 Pearson Education, Ltd. The Value Chain (1 of 4) Exhibit 1-5 The Value Chain of Business Functions Copyright © 2023 Pearson Education, Ltd. Accounting’s Position in the Organization (2 of 4) Management accountant’s role as consultant: – Collects and compiles information – Prepares standardized reports – Interprets and analyzes information – Is involved in decision making Copyright © 2023 Pearson Education, Ltd. Line and Staff Authority (3 of 4) Line managers: directly involved with making and selling products or services Staff managers: Advisory role – support line managers Cross-functional teams: Found in modern, “flatter” organizations; functional areas work together in decision- making process Copyright © 2023 Pearson Education, Ltd. Controller and Treasurer Function (4 of 4) Controller Functions: Treasurer Functions: – Planning for control – Provision of capital – Reporting and interpreting – Investor relations – Evaluating and consulting – Short-term financing – Tax administration – Banking and custody – Government reporting – Credits and collections – Protection of assets – Investments Risk – Economic appraisal management (insurance) Copyright © 2023 Pearson Education, Ltd. Current Trends in Management Accounting (1 of 3) Adaptation to change: – Shift from a manufacturing-based to a service-based economy – Increased global competition – Advances in technology – Changes in business process management Copyright © 2023 Pearson Education, Ltd. Current Trends in Management Accounting (2 of 3) Common characteristics of service organizations: – Labor is a major component of costs. – Output is usually difficult to measure. – Service organizations cannot store their major inputs and outputs. Global competition: lowered international barriers to trade, such as tariffs and duties. Brought a worldwide trend toward deregulation, shifting the balance of economic power in the world. Copyright © 2023 Pearson Education, Ltd. Current Trends in Management Accounting (3 of 3) Advances in technology: E-commerce; Enterprise resource planning (ERP); B2C and B2B Business process reengineering: Just-in-time (JIT) philosophy; Lean manufacturing; Total quality management (TQM) initiatives; Computer-integrated manufacturing Six sigma Copyright © 2023 Pearson Education, Ltd. Ethics (1 of 6) No regulation can be as effective in ensuring reliability as high ethical standards of accountants: – Trust – Reliability – Integrity Copyright © 2023 Pearson Education, Ltd. Standards of Ethical Conduct (2 of 6) The International Code of Ethics for Professional Accountants, a code of conduct developed by the International Ethics Standards Board for Accountants (IESBA) of the International Federation of Accountants (IFAC), which contains three parts: – Part 1 - Complying with the Code, Fundamental Principles and Conceptual Framework – Part 2 – Professional Accountants in Business – Part 3 – Professional Accountants in Public Practice Copyright © 2023 Pearson Education, Ltd. Standards of Ethical Conduct (3 of 6) Exhibit 1-7 International Code of Ethics for Professional Accountants Copyright © 2023 Pearson Education, Ltd. Standards of Ethical Conduct (4 of 6) Exhibit 1-7 International Code of Ethics for Professional Accountants Copyright © 2023 Pearson Education, Ltd. Ethical Dilemmas (5 of 6) Managers must choose an alternative and there are: – Significant value conflicts among differing interests – Real alternatives that are all justifiable – Significant consequences on stakeholders in the situation Copyright © 2023 Pearson Education, Ltd. Unethical Behavior Temptations (6 of 6) Emphasis on short-term results: Pressure to meet expected profit numbers. Ignoring the small stuff: Large misdeeds often result from many small ones. Economic cycles: Downturn markets reveal what an upturn market conceals. Vigilance in all stages of economic markets maintains high ethical standards. Accounting rules: Avoid creative interpretations of the rules. Practice full and fair disclosure to convey company’s performance. Copyright © 2023 Pearson Education, Ltd.