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Managerial Accounting: A Decision Focus, 8e:

Copyright © 2005 Hermanson Edwards Ivancevich Managerial Accounting: A Decision Focus, 8e Chapter 1: An Introduction to Managerial Accounting

Financial & Managerial Accounting:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Financial & Managerial Accounting Financial Accounting To provide information to users and interested persons outside the organization Managerial Accounting To provide useful information to managers (people inside the organization)

Organizations:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Organizations An organization is a group of people joined together in seeking some common goal(s) or objective(s) Organizations differ in their objectives; business firms seek to generate profits, while not-for-profit organizations do not. Management of an organization will use strategic planning to help it achieve its objectives strategic decisions about the products Not-for-profit organizations will make similar decisions

Organizing to Achieve Objectives:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Organizing to Achieve Objectives Management responsibility is decentralized when it is shared by a number of persons. Line departments Staff departments An organizational chart

Who’s Who in Accounting:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Who’s Who in Accounting The CFO (Chief Financial Officer) is the top accounting officer and a member a top management. The controller is the manager of the accounting department.

Basic Management Functions:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Basic Management Functions Planning Organizing Directing Controlling

Management by Exception (MBE):

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Management by Exception (MBE) The management function of control relies heavily on management by exception.

Feedback:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Feedback Establishing control over an organization depends heavily on feedback information on how well the organization is achieving its objectives. Feedback information is useful in Appraising the activities or operations Appraising the performance of individuals

A Model of the Decision-Making Process:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich A Model of the Decision-Making Process

Organizations – Differences & Similarities:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Organizations – Differences & Similarities Two Major Types of Organizations Profit-seeking Corporations Partnerships Single proprietorships Not-for-profit Governmental organizations Non-governmental organizations

Nature of Information:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Nature of Information Information – added knowledge Quantitative information Qualitative information Relevant Information – pertinent to the decision being made

Sources of Accounting Information:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Sources of Accounting Information Financial Accounting Information -largely from the data recorded for events and transactions Management Accounting - comes from a variety of sources within the organization.

Uses of Management Accounting Information:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Uses of Management Accounting Information Planning for future periods Strategic planning Capital budgeting Annual budgeting Short-range planning Organizing – using resources in the best way to achieve objectives Directing – using daily information (e.g, costs, margins, sales etc) to oversee operations Controlling – comparing actual results against what was planned; feedback in the form of performance reports is quite useful.

Similarities Between Financial & Managerial Accounting:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Similarities Between Financial & Managerial Accounting The primary data for both are accumulated in the same accounting system. Both are concerned with managerial responsibility.

Differences Between Management Accounting and Financial Accounting (1):

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Differences Between Management Accounting and Financial Accounting (1) Financial Accounting Information guided by GAAP External reports regarding the stewardship of organization as a whole Mandatory reporting Managerial Accounting Information governed by usefulness to internal users. Internal reports regarding the stewardship over various parts of the organization. Voluntary reporting – reported if benefits > cost

Differences Between Management Accounting and Financial Accounting (2):

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Differences Between Management Accounting and Financial Accounting (2) Financial Accounting Primarily historical and easily verifiable information Draws primarily from economics Managerial Accounting Includes significant amounts of prospective (forward looking) information; also includes many approximations and more nonmonetary information due to need for timeliness Draws heavily from economics, finance, statistics, and behavioral sciences

Management Accounting as a Recognized Discipline:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich Management Accounting as a Recognized Discipline Management Accounting is widely recognized as a discipline in its own right. Management accounting has broken beyond a primary focus of recording costs to include a myriad of information useful to managers involved in decision making.

The CMA Certificate:

Managerial Accounting: A Decision Focus 8e Copyright © 2005 Hermanson Edwards Ivancevich The CMA Certificate Parts of the Exam: Business Analysis Management Accounting and Reporting Strategic Management Business Applications Designation Awarded by the Institute of Management Accountants (IMA)

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