Horngrenima14e ch01

2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton
1 - 1
2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler 1-1
Chapter 1
Introduction to Management Accounting

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Users of Accounting Information
Internal managers
Creditors:
Suppliers
Bankers
Day-to-day operating decisions
Long-range strategic decisions
Management Accounting
Financial Accounting
External Users
Investors: Stockholders
Government Authorities
Learning
Objective 1
1 - 3
Scorekeeping:
Evaluate
Organizational
Performance
Attention Directing:
Compare Actual Results
to Expected
Problem Solving:
Assess Possible
Courses of Action
Decision Making
1 - 4
Process of gathering, organizing, and
Communicating financial information
Financial
Statements
Accounting Information System
1 - 5
Influences on Accounting Systems
Generally accepted accounting principles (GAAP)
Foreign Corrupt Practices Act
Internal controls
Management audits
Sarbanes-Oxley Act
Internal auditors
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Sarbanes-Oxley Act
In 2002, the Sarbanes-Oxley Act required
chief executive officers to sign a
statement verifying the accuracy of
the companys financial statements.
External auditors must examine and report
on the companys internal control system.
Learning
Objective 2
1 - 7
Ethics
No regulation can be as effective in
ensuring reliability as high ethical
standards of accountants.
Integrity Trust
Reliabilit
y
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Service and Nonprofit Organizations
Service
organizations
Nonprofit
organizations
Accounting firms
Law firms
Real estate firms
Banks
Hotels
Hospitals
Schools
Libraries
Museums
Government agencies
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Cost-Benefit and Behavioral
Considerations
Cost-benefit
balance
Behavioral
implications
Weigh estimated
costs against
probable benefits.
The system must provide
accurate, timely budgets and
performance reports in a form
useful to managers.
Managers must use accounting
reports, or the reports
create no benefits.
Learning
Objective 3
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Decision Making
Decision making: the purposeful choice
from among a set of alternative courses
of action designed to achieve some objective.
Planning: Setting
objectives and outlining
how the objectives will
be obtained.
Control: Implementing
plans and using feedback
to evaluate the attainment
of objectives.
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The Nature of Planning and
Controlling
Planning
Increase
Profitability
Control
Actions
Evaluations
C
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Budgets,
Special
Reports
Accounting
System
Performance
Reports
Customer
surveys
Competitor
analysis
Advertising
impact
New items
report
Internal Accounting System Management Process
Other information
systems
Learning
Objective 4
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Budget and Performance Reports
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
Variances: deviations from plans
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Performance Reports
Budget Actual Variance
Sales $50,000 $50,000 0
Less:
Ingredients 22,000 24,500 $2,500 U
Store labor 12,000 11,600 400 F
Other labor 6,000 6,050 50 U
Utilities, etc. 4,500 4,500 0
Total expenses $44,500 $46,650 $2,150 U
Operating income $ 5,500 $ 3,350 $2,150 U

U= Unfavorable actual exceeds budget
F Favorable actual is less than budget.
Mayfair Starbucks Store, March 31, 20X7
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Product Life Cycle
Product life cycle refers to the various
stages through which a product passes.
No Sales
Product
Development
Sales Growth
Introduction to Market
Stable Sales Level
Mature Market
Low sales No sales
Phase-out
Product
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The Value Chain
Customer
Focus
Research
and
Development
Product
And
Service
Process
Design
Production
Marketing
Distribution
Service
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Management Accountants Role as
Internal Consultant
Prepares
standardized
reports
Collects
and compiles
information
Interprets and
Analyzes information
Is Involved
In decision making
Internal
Consultant
Management
Learning
Objective 5
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Organizational Authority and Responsibility
Line managers:
directly involved with
making and selling
products or services.
Staff managers: Advisory
Support line managers.
Cross-functional teams: Found in
modern, flatter organizations;
Functional areas work together
In decision making process.
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Accounting Function
Planning for control
Reporting and interpreting
Evaluating and consulting
Tax administration
Government reporting
Protection of assets
Economic appraisal
Treasurer Functions
Provision of capital
Investor relations
Short-term financing
Banking and custody
Credits and collections
Investments
Risk management (insurance)
Controller Functions
Chief Financial Officer (CFO)
Learning
Objective 6
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Career Opportunities in Management Accounting
The Certified Management Accountant (CMA)
CMAs must pass a four-part examination:
1. Business Analysis
2. Management accounting and reporting
3. Strategic Management, and
4. Business Applications.

Learning
Objective 7
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Management Accounting Change Drivers
Shift from a manufacturing-based
to a service-based economy
Increased global competition
Advances in technology
Changes in business processes
Learning
Objective 8
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Major Influences on Management
Accounting
Business process reengineering:
Just-in-time (JIT) philosophy
Lean manufacturing
Computer-integrated manufacturing
Six sigma
Advances in technology:
E-commerce
Enterprise resource planning (ERP)
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Standards of Ethical Conduct
The Institute of Management Accountants (IMA)
Statement of Ethical Professional Practice for
Management Accounting Members
Requires members to adhere
to a code of conduct regarding:
Competence,
Confidentiality,
Integrity, and
Credibility.
Learning
Objective 9
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Ethical Dilemmas
Managers must choose an alternative and there are:
Significant value conflicts among differing interests.
Real alternatives that are all justifiable, and
Significant consequences on stakeholders in the situation.
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Unethical Behavior Temptations
4. Accounting rules
Avoid creative interpretations of the rules.
Practice full and fair disclosure to convey companys performance.
1. Emphasis on short-term results:
Pressure to meet expected profit numbers.
2. Ignoring the small stuff:
Large misdeeds often result from many small ones.
3. Economic cycles:
A downturn market can reveal what an upturn market conceals.
Vigilance in all stages of economic markets maintains high ethical standards.
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The End
End of Chapter 1

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2007 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton

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