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Chapter 19-1
Chapter 19
Managerial
Accounting
Accounting Principles, Ninth Edition
Chapter 19-2
1. Explain the distinguishing features of managerial accounting.
2. Identify the three broad functions of management.
3. Define the three classes of manufacturing costs.
4. Distinguish between product and period costs.
5. Explain the difference between a merchandising and a manufacturing income statement.
6. Indicate how cost of goods manufactured is determined.
7. Explain the difference between a merchandising and a manufacturing balance sheet.
8. Identify trends in managerial accounting.
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
Chapter 19-3
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
A field of accounting that provides economic A field of accounting that provides economic and financial information for managers and and financial information for managers and
other internal users.other internal users.
Also calledAlso called Management AccountingManagement Accounting
Definition of Managerial Accounting
Chapter 19-4
Managerial Accounting Activities
Explain manufacturing and nonmanufacturing costs and how they are reported. (Chapter 19)
Compute cost of providing a service or manufacturing a product. (Chapters 20 and 21)
Determine behavior of costs and expenses as activity changes. (Chapter 22)
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Chapter 19-5
Managerial Accounting Activities (continued)
Assist management in profit planning and formalizing these plans in the form of budgets. (Chapter 23)
Help to control costs by comparing actual results with planned objectives and standard costs. (Chapters
24 and 25)
Accumulate and present data for making decisions. (Chapter 26)
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Chapter 19-6
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Applies to all types of business -Service, Merchandising, and Manufacturing
Applies to all forms of businesses –Proprietorships, Partnerships, and Corporations
Applies to not-for-profit and profit oriented companies
Distinguishing Features
Chapter 19-7
More responsible for strategic cost management
Teams with people from production, marketing, engineering, etc.
Aid in making critical decisions
Distinguishing Features: Continued
Managerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting BasicsManagerial Accounting Basics
Chapter 19-8
Both deal with economic events of a business –
Thus, interests overlap
Both require that economic events be quantified and communicated tointerested parties –
Determining unit cost is part of managerial accounting,
Reporting cost of goods manufactured
is a part of financial accounting
Similarities
SO 1 Explain the distinguishing features of managerial accounting.SO 1 Explain the distinguishing features of managerial accounting.
Comparing Managerial and Financial Comparing Managerial and Financial AccountingAccountingComparing Managerial and Financial Comparing Managerial and Financial AccountingAccounting
Chapter 19-9
Differences
SO 1 Explain the distinguishing features of managerial accountingSO 1 Explain the distinguishing features of managerial accounting ..
Comparing Managerial and Financial Comparing Managerial and Financial AccountingAccountingComparing Managerial and Financial Comparing Managerial and Financial AccountingAccounting
Illustration 19-1
Chapter 19-10
Managerial accounting:Managerial accounting:
a.a. Pertains to the entity as a whole and is highly Pertains to the entity as a whole and is highly aggregatedaggregated.
b. Places emphasis on special-purpose information.
c. Is limited to cost data.
d. Is governed by generally accepted accounting principles.
Review Review QuestionQuestion
SO 1 Explain the distinguishing features of managerial SO 1 Explain the distinguishing features of managerial accounting.accounting.
Comparing Managerial and Financial Comparing Managerial and Financial AccountingAccountingComparing Managerial and Financial Comparing Managerial and Financial AccountingAccounting
Chapter 19-11
Management’s activities and responsibilities Management’s activities and responsibilities can be classified into the following three can be classified into the following three
broad functions:broad functions:
PlanningPlanning DirectingDirecting
ControllingControlling
Management Functions
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Chapter 19-12
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Look ahead and establish objectives such as –
Maximize short-term profitCommit to environmental protection
Key Objective: Add value to the business
Value measured by trading price of stock and by potential selling price of the company
Planning
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Chapter 19-13
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Coordinate diverse activities and human resources
Implement planned objectives
Provide incentives to motivate employees
Hire and train employees including executives, managers, and supervisors
Produce smooth-running operation
Directing
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Chapter 19-14
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
Keep activities on track
Determine whether goals are met
Decide changes needed to get back on track
May use an informal or formal system of evaluations
Good decision making is the outcome of good judgment in planning, directing, and
controlling.
Controlling
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Chapter 19-15
The management of an organization performs The management of an organization performs several broad functions. They are:several broad functions. They are:
a.a. Planning, directing, and sellingPlanning, directing, and selling.
b. Directing, manufacturing, and controlling.
c. Planning, manufacturing, and controlling.
d. Planning, directing, and controlling.
Review Review QuestionQuestion
Management FunctionsManagement FunctionsManagement FunctionsManagement Functions
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Chapter 19-16
Business Ethics
Business scandals caused massive investment losses and employee layoffs.
Corporate fraud has increased 13% in last 5 years.
Employee fraud – 60% of all fraud
Intentional misstatement of financial reports Aka financial reporting fraud
Most costly to companies
Good Ethics – Good BusinessGood Ethics – Good BusinessGood Ethics – Good BusinessGood Ethics – Good Business
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Chapter 19-17
Creating Proper Incentives
Systems to monitor and evaluate employees may produce incentives for unethical actions.
Employees may feel that they must succeed no matter what.
Ineffective and unrealistic controls may result in declining product quality.
Good Ethics – Good BusinessGood Ethics – Good BusinessGood Ethics – Good BusinessGood Ethics – Good Business
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.
Chapter 19-18
Sarbanes-Oxley Act of 2002
Clarifies management’s responsibilities.
Certifications by CEO and CFO -fairness of financial statements and
adequacy of internal control
Selection criteria for Board of Directors and Audit Committee
Substantially increased penalties for misconduct
IMA Statement of Ethical Professional Practices
Good Ethics – Good BusinessGood Ethics – Good BusinessGood Ethics – Good BusinessGood Ethics – Good Business
Code of Ethical Standards
SO 2 Identify the 3 broad functions of management.SO 2 Identify the 3 broad functions of management.