Chapter One Introduction: The Role, History, and Direction of

Transcript Chapter One Introduction: The Role, History, and Direction of

1 Introduction: The Role, History, and Direction of Management Accounting PowerPresentation® prepared by David J. McConomy, Queen’s University 1-1

Learning Objectives

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Explain the need for management accounting information.

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Explain the differences between management accounting and financial accounting.

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Provide a brief historical description of management accounting.

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Identify and explain recent developments affecting management accounting.

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Learning Objectives (continued)

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Describe the role of management accountants in an organization.

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Explain the importance of ethical behaviour for managers and management accountants.

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Identify the different professional accounting designations available for management accountants.

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Management Accounting Information Systems Economic Events Collecting Measuring Storing Analyzing Reporting Managing Special Reports Product Costs Customer Costs Budgets Performance Reports Personal Communication Inputs Processes Outputs Copyright © 2004 by Nelson, a division of Thomson Canada Limited.

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The Management Process The Management Process is defined by the following activities:

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Planning

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Controlling

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Decision making

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The Management Process (continued)

Planning

requires setting objectives and identifying methods to achieve those objectives.

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The Management Process (continued)

Controlling

is the managerial activity of monitoring a plan’s implementation and taking corrective action as needed.

Control is usually achieved with the use of

feedback

, which is information that can be used to evaluate or correct the steps being taken to implement a plan.

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The Management Process (continued)

Decision making

is the process of choosing among competing alternatives.

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Conceptual Framework of Management Accounting

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Cost Accumulation and Product Costing (Part I of Text)

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‘Know your costs’ The role of indirect costs

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Managerial Decision Making (Part II of Text)

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‘What difference will it make’ when a choice is to be made between alternative courses of action?

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We assume economically-rational organizations and what is good for the sub-unit is good for the organization as a whole.

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Planning & Control Systems (Part III of Text)

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Focus on how organizations run by delegation & accountability Information asymmetry results in difficulty assessing goal congruence. We assume economically rational decision makers who have their own goals within the organization Copyright © 2004 by Nelson, a division of Thomson Canada Limited.

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Comparison of Management and Financial Accounting Management Accounting Financial Accounting 1. Internally focused 2. No mandatory rules 3. Financial and nonfinancial information; subjective information possible 4. Emphasis on the future 5. Internal evaluation and decisions based on very detailed information 6. Broad, multidisciplinary 1. Externally focused 2. Must follow externally imposed rules 3. Objective financial information 4. Historical orientation 5. Information about the organization as a whole 6. More self-contained Copyright © 2004 by Nelson, a division of Thomson Canada Limited.

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Historical Description of Management Accounting 1880 - 1925 1925 1950s/60s Most of the product-costing and internal accounting procedures used in this century were developed Emphasis changes to inventory costing for external reporting Some effort to improve the managerial usefulness of traditional cost systems 1980s/90s Significant efforts have been made to develop a new management accounting system Copyright © 2004 by Nelson, a division of Thomson Canada Limited.

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Recent Developments Affecting Management Accounting

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Activity-Based Management

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Customer Orientation

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Strategic Positioning

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Value Chain Framework

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Cross-Functional Perspective

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Current Focus of Management Accounting II

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Environmental Perspective

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Total Quality Management

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Time as a Competitive Element

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Efficiency

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Controller Controller’s Functions Financial Vice-president Treasurer Treasurer's Functions 1-14

Role of Controller and Treasurer Controller 1. Financial reports 2. Securities commission reporting 3. Tax planning and reporting 4. Performance reporting 5. Internal auditing 6. Budgeting 7. Accounting systems and internal controls Copyright © 2004 by Nelson, a division of Thomson Canada Limited.

Treasurer 1. Raises Cash 2. Manages Cash 3. Manages Investments 4. Credit and Collections 5. Insurance 1-15

Management Accounting and Ethical Conduct Attributes of Ethical Behaviour

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Caring for Others Respect for Others Responsible Citizen Pursuit of Excellence Accountability 1-16

Standards of Ethical Conduct for Management Accountants

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Competence

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Confidentiality

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Integrity

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Professional Designations

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CMA -The distinguishing characteristic of the profession is to establish management accounting as a recognized professional discipline, separate from the profession of public accounting.

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CA - The distinguishing characteristic of the profession is its focus on providing assurance concerning the reliability of financial statements to external parties.

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CGA These accountants may specialize in several specialty fields, including management accounting.

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Chapter One Introduction: The Role, History, and Direction of

Transcript Chapter One Introduction: The Role, History, and Direction of

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