pepperdine university pepperdine university
TRANSCRIPT
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An electronic
presentation byDouglas Cloud
Pepperdine University
An electronic
presentation byDouglas Cloud
Pepperdine University
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Task Force Clip ArtTask Force Clip Art
included in this electronicincluded in this electronic
presentation is used withpresentation is used withthe permission of Newthe permission of New
Vision Technology ofVision Technology of
Nepean Ontario, Canada.Nepean Ontario, Canada.
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Introduction:Introduction:
The Role,The Role,
History, andHistory, andDirection ofDirection of
ManagementManagementAccountingAccounting
CHAPTERCHAPTER
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1. Discuss the need for management accounting
information.
2. Differentiate between management accounting
and financial accounting.
3. Provide a brief historical description of
management accounting.
4. Identify the current focus of managementaccounting.
ObjectivesObjectives
ObjectivesObjectives
After studying thisAfter studying this
chapter, you shouldchapter, you should
be able to:be able to:
After studying thisAfter studying this
chapter, you shouldchapter, you should
be able to:be able to:
ContinuedContinued
ContinuedContinued
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5. Describe the role of management accountants in
an organization.
6. Explain the importance of ethical behavior for
managers and management accountants.
7. List three forms of certification available to
management accountants.
ObjectivesObjectives
ObjectivesObjectives
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1. To provide information for costing outservices, products, and other objects ofinterest to management.
2. To provide information for planning,controlling, evaluating, and continuousimprovement.
3. To provide information for decisionmaking.
The managerial accounting system has three
broad objectives:
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OutputsOutputsProcessesProcessesInputsInputs
Economic
Events
Collecting
Measuring
Storing
Analyzing
ReportingManaging
Special Reports
Product Costs
Customer Costs
Budgets
Performance ReportsPersonal Communication
UsersUsers
Management Accounting
Information System
Management Accounting
Information System
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TheManagement Process is defined by the
following activities:
Planning
Controlling
Decision Making
Planningrequires
setting objectivesand identifying
methods to achieve
those objectives.
Management ProcessManagement Process
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TheManagement Process is defined by the
following activities: Controllingisthe managerial
activity of
monitoring a
plans
implementation
and taking
corrective action
as needed.
Planning
Controlling
Decision Making
Management ProcessManagement Process
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TheManagement Process is defined by the
following activities:
Planning
Controlling
Decision Making
Control isusually achieved
with the use of
feedback.
Management ProcessManagement Process
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Feedbackis information
that can be used to
evaluate or correct the
steps being taken toimplement a plan.
Feedbackis information
that can be used to
evaluate or correct the
steps being taken to
implement a plan.
Management ProcessManagement Process
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TheManagement Process is defined by the
following activities:
Decision
makingis
the process
of choosingamong
competing
alternatives.
Planning
Controlling
Decision Making
Management ProcessManagement Process
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Differentiate Between
Management Accounting and
Financial Accounting
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Management AccountingManagement AccountingManagement AccountingManagement Accounting Financial AccountingFinancial AccountingFinancial AccountingFinancial Accounting
1. Internally focused 1. Externally focused
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Management
accountingfocuses on
providing
information for
internal users.
Targeted UsersTargeted Users
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ABC
Company
AnnualReport
Financial
accounting focuseson provided
information for
external users.
Financial
accounting focuses
on provided
information for
external users.
Targeted UsersTargeted Users
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Management AccountingManagement AccountingManagement AccountingManagement Accounting Financial AccountingFinancial AccountingFinancial AccountingFinancial Accounting
1. Internally focused 1. Externally focused
2. No mandatory rules 2. Must follow externallyimposed rules
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Restrictions on Inputs and ProcessesRestrictions on Inputs and ProcessesRestrictions on Inputs and ProcessesRestrictions on Inputs and Processes
Management accounting is not
subject to the requirements of
generally accepted accounting
principles.
Management accounting is not
subject to the requirements of
generally accepted accounting
principles.
Financial accounting reporting must
follow the accounting procedures set
by the SEC and the FASB.
Financial accounting reporting must
follow the accounting procedures set
by the SEC and the FASB.
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Management AccountingManagement AccountingManagement AccountingManagement Accounting Financial AccountingFinancial AccountingFinancial AccountingFinancial Accounting
1. Internally focused 1. Externally focused
2. No mandatory rules 2. Must follow externallyimposed rules
3. Financial andnonfinancial informa-
tion; subjectiveinformation possible
3. Objective financialinformation
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Management AccountingManagement AccountingManagement AccountingManagement Accounting Financial AccountingFinancial AccountingFinancial AccountingFinancial Accounting
1. Internally focused 1. Externally focused
2. No mandatory rules 2. Must follow externallyimposed rules
3. Financial andnonfinancial informa-
tion; subjectiveinformation possible
3. Objective financialinformation
4. Emphasis on the future 4. Historical orientation
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TimeTime OrientationOrientationTimeTimeOrientationOrientation
Management
accounting stronglyemphasizes providing
information about
future events.
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Financialaccounting records
and reports events
that have already
happened.
TimeTime OrientationOrientationTimeTimeOrientationOrientation
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Management AccountingManagement AccountingManagement AccountingManagement Accounting Financial AccountingFinancial AccountingFinancial AccountingFinancial Accounting
1. Internally focused 1. Externally focused
2. No mandatory rules 2. Must follow externallyimposed rules
3. Financial andnonfinancial informa-
tion; subjectiveinformation possible
3. Objective financialinformation
4. Emphasis on the future 4. Historical orientation
5. Internal evaluation anddecisions based on verydetail information
5. Information about thefirm as a whole
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Management
accounting provides
measures and internalreports used the
evaluate performance of
entities, product lines,
departments, and
managers.
Degree of AggregationDegree of AggregationDegree of AggregationDegree of Aggregation
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Financial
accounting focuses
on overall firm
performance.
Degree of AggregationDegree of AggregationDegree of AggregationDegree of Aggregation
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Management AccountingManagement AccountingManagement AccountingManagement Accounting Financial AccountingFinancial AccountingFinancial AccountingFinancial Accounting
1. Internally focused 1. Externally focused
2. No mandatory rules 2. Must follow externallyimposed rules
3. Financial andnonfinancial informa-
tion; subjectiveinformation possible
3. Objective financialinformation
4. Emphasis on the future 4. Historical orientation
5. Internal evaluation anddecisions based on verydetail information
5. Information about thefirm as a whole
6. Broad, multidisciplinary 6. More self-contained
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Management accounting is much
broader than financial accounting.
Management accounting is much
broader than financial accounting.
It includes aspects of managerial
economics, industrial engineering,
and management science.
It includes aspects of managerial
economics, industrial engineering,
and management science.
BreadthBreadthBreadthBreadth
Hi t i l D i ti f
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1 -29Historical Description of
Management Accounting
1880 - 1925 Most of the product-costing and internal
accounting procedures used in this century
were developed
1925 Emphasis of inventory costing for externalreporting
1950s/60s Effort to improve the managerial usefulness
of traditional cost systems
1980s/90s Significant efforts have been made toradically change the nature and practice of
management accounting
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Current Focus of Management AccountingCurrent Focus of Management Accounting
Activity-Based ManagementActivity-Based ManagementActivity-Based ManagementActivity-Based Management
Activity-based management is a system
wide, integrated approach that focusesmanagements attention on activities with the
objective of improving customer value and
the resulting profit.
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Current Focus of Management AccountingCurrent Focus of Management Accounting
Customer OrientationCustomer OrientationCustomer OrientationCustomer Orientation
Customer value is the difference between
what the customer receives (customersatisfaction) and what the customer gives up
(customer sacrifice).
What is received is called the total product.
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Current Focus of Management AccountingCurrent Focus of Management Accounting
Strategic PositioningStrategic PositioningStrategic PositioningStrategic Positioning
Strategic cost management is the use of cost data
to develop and identify superior strategies thatwill produce a sustainable competitive advantage.
Strategies:
1) Cost leadership
2) Superior products through differentiation
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Current Focus of Management AccountingCurrent Focus of Management Accounting
Value-Chain FrameworkValue-Chain FrameworkValue-Chain FrameworkValue-Chain Framework
The internal value chain is the set of activities
required to design, develop, produce, market,and deliver products and services to customers.
The industrial value chain is the linked set of
value-creating activities from basic rawmaterials to the disposal to the final products by
end-use customers.
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SupermarketsSupermarkets
Value Chain:
Apple Industry
Planting andPlanting and
CultivatingCultivating
HarvestingHarvesting
Distribution ofDistribution of
ApplesApples
ApplesauceApplesauce
ProductionProduction
ApplesauceApplesauceDistributionDistribution
Firm
B
Firm
C
Firm
A
Product Disposal
End-Use Customer
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Managing the value chain means
that a management accountant
must understand many functions
of the business, from
manufacturing to marketing.
Managing the value chain means
that a management accountant
must understand many functionsof the business, from
manufacturing to marketing.
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The philosophy of total
quality management is to
manufacture perfect products.
The philosophy of total
quality management is to
manufacture perfect products.
This emphasis on quality has
created a demand for managementaccounting systems that provide
financial and nonfinancial
information about quality.
This emphasis on quality has
created a demand for managementaccounting systems that provide
financial and nonfinancial
information about quality.
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The role ofThe role ofmanagementmanagement
accountants in anaccountants in an
organization isorganization is
one of support.one of support.
The role ofThe role of
managementmanagement
accountants in anaccountants in an
organization isorganization is
one of support.one of support.
Partial Organization Chart
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Manufacturing Company
PresidentPresident
ProductionProduction
Vice PresidentVice President
Line Function
FinancialFinancial
Vice PresidentVice President
Staff Function
ProductionProduction
SupervisorSupervisor
MachiningMachining
ForemanForeman
AssemblyAssembly
ForemanForeman
ControllerController TreasurerTreasurer
InternalInternal
AuditAuditCostCost FinancialFinancial SystemsSystems
TaTa
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Ethical
Behavior
Ethical
Behavior
Michael Josephsons* Ten Ethical Values:
Honesty
Integrity
Promise keeping
Fidelity
Fairness
Caring for others
Respect for others
Responsible
citizenship
Pursuit of excellence
Accountability
*Michael Josephson, Teaching Ethical Decision Making and Principled
Reasoning
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CMA: One of the main purposes of the CMA was to establish
management accounting as a recognized, professionaldiscipline, separate from the profession of public
accounting.
CPA: The responsibility of a CPA is to provide assurance
concerning the reliability of financial statements.CIA: The focus of the CIA is to recognize competency in
internal auditing rather than external auditing as with
the CPA.
Professional CertificationsProfessional Certifications
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The CMAThe CMA
Four areas emphasized on the exam:
1) Economics, finance, and management
2) Financial accounting and reporting
3) Management report, analysis, and behavioral
issues
4) Decision analysis and information systems
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The EndThe EndThe EndThe End
Chapter OneChapter One