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Managerial Accounting &the Business Environment

Chapter 1

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Managerial Accounting and

Financial Accounting

ManagerialManagerialaccounting

provides information

for managers insideinside an

organization who

direct and control

its operations.

FinancialFinancialaccounting

provides information

to stockholders,

creditors and others

who are outsideoutside

the organization.

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Work of Management

Planning

Controlling

Directing and

Motivating

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Planning and Control Cycle

Decision

Making

Formulating long-

and short-term plans

(Planning)

Measuring

performance

(Controlling)

Implementing

plans (Directing

and Motivating)

Comparing actual

to planned

performance

(Controlling)

Begin

Exh.

1-1

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Differences Between Financial

and Managerial Accounting

Financia l Accounting Manageria l Accounting

1. Use rs xte rna l e rsons w o M a na ge rs w o la n for

a e fi na n ci a l d e cisio ns a n d co ntro l a n org a niza ti on

2. Ti e focus Historica l e rs e cti e Future e a sis

3. Ve rifia bilit a sis on a sis on re le a nce

e rsus re le a nce e rifia bilit for la nning a nd control

4. re cision e rsus a sis on a sis on

ti e line ss re cision ti e line ss

5. Subje ct ri a r focus is on Focuse s on se g e ntst e w ole orga niza tion of a n orga niza tion

6. Re quire e nts M ust follow GAA Ne e d not follow GAA

a nd re scribe d for a ts or a n re scribe d for a t

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orporate Organization Chart

Purchasing Personnel Vice President

Operations

Treasurer Controller

Chief Financial

Officer

President

Board of Directors

Organizational Structure

Decentralization is the delegation of decision-making

authority throughout an organization.

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Line and Staff elationships

Line position are directlyrelated to achievement ofthe basic objectives of anorganization.

E ample: Productionsupervisors in amanufacturing plant.

Staff positions support andassist line positions.

E ample: Costaccountants in the

manufacturing plant.

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Growth of the internet

Just-in- ime production

otal QualityManagement

International competition

Business environmentchanges in the past

twenty years

he Changing Business

Environment

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Importance of Ethics

in Accounting

Ethical accounting practices build trust and

promote loyal, productive relationships with

users of accounting information.

Many companies and professional

organizations, such as the Institute

of Management Accountants (IMA),

have written codes of ethics whichserve as guides for employees.

Code of Conduct for Management

Accountants

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IMA Code of Ethics for

Management Accountants

Four road areas of

responsi ility:

Maintain a high level ofprofessional competence

treat sensitive matters with

confidentiality

Maintain personal integrity

Be o ective in alldisclosures

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Competence

IMA Code of Ethics for

Management Accountants

Follow applica le laws,

regulations and

standards.

Maintain

professional

competence.

Prepare complete and clear

reports after appropriate

analysis.

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Confidentiality

IMA Code of Ethics for

Management Accountants

Do not disclose confidential

information unless legally

o ligated to do so.

Ensure that su ordinates do

not disclose confidential

information.

Do not use

confidential

information for

personal

advantage.

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IMA Code of Ethics for

Management Accountants

Avoid conflicts of interest

and advise others of

potential conflicts.

ecogni e and

communicate personal and

professional limitations.

Do not su vert

organi ations

legitimate

o ectives.

Integrity

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IMA Code of Ethics for

Management Accountants

Integrity

Avoid activities that could

affect your a ility to

perform duties.

Communicate

unfavora le as well as

favora le information.

Refrain from

activities

that could

discredit the

profession.

Refuse gifts

or favors

that might

influence

ehavior.

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IMA Code of Ethics for

Management Accountants

Communicate information

fairly and o ectively.

Communicate information

fairly and o ectively.

Disclose all information

that might e useful to

management.

Disclose all information

that might e useful to

management.

O ectivityO ectivity

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Resolution of Ethical Conflict

Follow esta lished policies.

For unresolved ethical conflicts: Discuss the conflict with immediate

superior.

If immediate superior is the CEO,consider the oard of directors orthe audit committee.

E cept where legally prescri ed,maintain confidentiality.

IMA Code of Ethics for

Management Accountants

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Resolution of Ethical Conflict

Clarify issues in a confidentialdiscussion with

an o ective advisor.

Consult an attorney as to legalo ligations.

he last resort is to resign.

IMA Code of Ethics for

Management Accountants

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End of Chapter