CHAP 1: Managerial Accounting and the business environment
aka Overview of Managerial Accounting
I. What is managerial Accounting?
Phân biệt managerial accounting và financial accounting (ktqt và kttc)
and - Ingeneral,managershavetoansweraspartoftheplanningprocess,whichareoften
accompanied by a budget (Budget is a detailed plan for the future that expressed in
formalquantitativeterms)(Cáckếhoạchthườngđikèmvớingânsách.Ngânsáchlà
Financial Accounting Managerial Accounting
một kế hoạch chi tiết cho tương lai, thường đượcthểhiệnbằngcácthuậtngữđịnh
1. Users xternal persons who make
E anagers who plan and
M lượng chính thức)
financial decisions control an organization
b) Controlling
2. Time focus Historical perspective Future emphasis - Unlike the planning parts, the controlling part has many questions thatneedtobe
. Verifiability
3 mphasis on verifiability
E mphasis on relevance in
E answered beyond simple yes/no answers in search of underlying reasons why
versus relevance (kiểm chứ ng) planningandcontrol(tínhliên performance exceeds/fails to meet expectations.
quan trong lập kế hoạch và -Partsofthecontrollingpartconsistofperformancereport-comparesbudgeteddata
kiểm soát) to actual data in an effort to identify and learn from excellent performance and to
. Precision
4 Emphasis on Precision mphasis on Timeliness (tính
E identify and eliminate sources of unsatisfactory performance-whichcanbeusedas
versus timeliness kịp thờ i) one of many inputs to help evaluate and reward employees
→ The control function gathers feedback to ensure that plans are being
5. Subject On the whole organization n
O segments of an followed.
organization
→ Feedback in the form of performance reports that compare actual results
6. GAAP ust follow GAAP
M and N
eed not to follow GAAPand with the budget are an essential part of the control function.
prescribed formats prescribed formats
c) Decision making
7. Requirement andatory for external
M Not mandatory - Generally speaking, many of the decisions revolve around 3 following questions:
reports What should we be selling? Who should we be serving? How should we execute?
Example:
Managerialaccountinghelpsmanagerstoperform3vitalactivities:Planning,
→
Controlling and Decision making:
a) Planning:
Controlling I s the budgeted price cut D
id we spend more or less I s our employee
increasing unit sales as than expected for the units retention rate exceeding
expected? we actually produced? our goals?
re we accumulating too A
A re we achieving our goal of A
re we meeting our goal
much inventory during reducing the number of of completing timely
the holiday shopping defective units produced? performance appraisals?
season?
ecision
D S hould we sell our S hould we buy a new piece S hould we hire an on-site
Making services as one bundle or of equipment or upgrade our medical staff to lower
sell them separately? existing machine? our health care costs?
S hould we sell directly S hould we redesign our S hould we hire
to customers or use a manufacturing process to temporary workers or
distributor? lower inventory levels? full-time employees?
in which,
+ T he left - hand column: planning, controlling, and decision making applications in the
marketing profession.
II. Why Does Managerial Accounting Matter to Your Career? + The middle column: states that operations managers have to plan how many units to
produce to satisfy anticipated customer demand - budget for operating expenses
such as utilities, supplies, and labor costs → decide whether to buy/sell equipment,
restock, upgrade or invest in redesigning a manufacturing process to reduce
inventory levels.
+ The right - hand column: how human resource managers make a variety of planning
decisions, such as budgeting how much to spend on occupational safety training and
employee recruitment advertising. Including monitoring feedback related to
numerous management concerns and helping in making important decisions whether
a) Business majors: to hire employees, etc
his table below shows how planning, controlling, and decision making affect three
T
majors other than accounting—marketing, operations management, and human ) Accounting majors (txtbook)
b
resource management. c) Management accounting and cost accounting
Management Accounting Cost accounting
Marketing Operations Management HR management
r elates to the provision of appropriate efines costs and valuates inventories to
d
Planning ow much should we
H ow many units should we H
H ow much should we information, including cost information help managers to run businesses;
budget for TV, print, and plan to produce next period? plan to spend for for decision-making, planning, control, examples including:
Internet advertising? occupational safety and performance evaluation. - FIFO, weighted average inventory
training? valuation technique
ow many salespeople
H ow much should we budget H
H ow much should we - Job costing, Process costing,
should we plan to hire to for next period’s utility budget for next period’s Activity-based costing
serve a new territory? expense? utility expense? - Cost allocation techniques
→ Management Accounting and Cost Accounting:
- are intertwined and
- the terms are sometimes interchangeable
→ their functions are to help companies make better decisions
III. Skills of managers
- Value Creation: Value - added activities and processes
+ Create value to stakeholders
+ Need to pay attention to value-added (vs. non-valueadded) activities and
processes:
Activity-based costing and management
Lean production
Just-in-time inventory management and production
a ) Strategic management skills:
→ A strategy is a “game plan” that enables a company to attract customers by echniques focusing on T
T heory of Constraints
value-added activities Kaizen costing
distinguishing itself from competitors.
and processes
→ The focal point of a company’s strategy should be its target customers. → customer
Life-cycle costing
value propositions are the essence of strategy.
Target pricing and costing
uality management, e.g. total quality management
Q
and six sigma
- Value Creation: Different perspectives
xternal Perspectives – Value chain
E - Suppliers (upstream)
management - Customers (downstream)
I nternal Perspectives – Value chain - Business processes
management
Leadership Perspective Leaders who can unite behaviors of
f ellow employees: + T
eam-Based Decision Making – Encourage data-driven discussions, weigh
- Need to considerintrinsic and extrinsic alternatives, and build consensus.
motivating factors
IV. Managerial Accounting: Beyond the Numbers
- Need to be aware ofcognitive biases
that adversely affect planning, - In addition to the External, Internal, Leadership and Cultural Perspectives, the
controlling and decision making. following four business management perspectives also go beyond the numbers to
enable intelligent planning, control, and decision making:
Cultural Perspective ational and organizational cultures
N + An Ethics Perspective
- Power distance, individualism,
uncertainty avoidance, masculinity and + A Corporate Governance Perspective
long-term orientation + An Enterprise Risk Management Perspective
+ A Corporate Social Responsibility and Sustainability Perspective
b) Process management:
) Ethics Perspective:
a
- A business process is aseriesofstepsthatarefollowedinordertocarryoutsome
+ AllAccountantsbodiesissuetheirownCodeofConductbutalsosharesimilar
task in a business.
fundamental principles and conceptual approaches as the one issued by the
Institute of Management Accountants (IMA) - Statement of Ethical
Professional Practice:
1. Ethical behavior;
2. Resolution for an ethical conflict
- Lean production: management approach that organizes resources such as people and
machines around the flow of business processes and that only produces units in
response to customer order (as JIT - Just in time - only manufactured in response to
customer orders and they are completed just-in-time to be shipped to customer)
→ Lean thinking: organize work departmentally and encourage those departments to
maximize their output even if it exceeds customer demand and bloats inventories.
c) Leadership skills:
- Leadership is crucial because organizations are managed by people, not just data.
- Managers must navigate personal interests, beliefs, and differing opinions to align
teams toward goals.
- Six key leadership skills:
+ Technical Competence – Be proficient in your area and understand broader
company operations.
+ Integrity – Make ethical decisions and foster a culture of integrity.
+ Change Management – Define a vision, motivate others, and implement ● IMA Guidelines for Ethical behavior
organizational change.
+ Communication Skills – Master presentations, listening, and speaking in both
operational and financial terms.
+ Motivation&Mentorship–Developsubordinates'skillstogrowintoleadership
roles.
● IMA Guidelines for Resolution of an Ethical Conflict
Follow employer’s established policies.
→
- For an unresolved ethical conflict:
+ Discuss the conflict with the immediate supervisor or the next highest
uninvolved manager.
+ If the immediate supervisor is the CEO, consider the board of directors or the
audit committee.
+ Contact with levels above the immediate supervisor should only be initiated
with the supervisor’s knowledge, assuming the supervisor is not involved.
+ Except where legally prescribed, maintain confidentiality.
+ Clarify issues in a confidential discussion with an objective advisor
+ Consult an attorney as to legal obligations
● Reasons for having Ethical Standards and codes of conduct
- The Sarbanes-Oxley Act of 2002: consist of details to protect the interests of those
who invest in publicly traded companies by improving the reliability and accuracy of
corporate financial reports and disclosures
c) E
nterprise Risk Management Perspective: A process used by a company to
proactively identify and manage risk.
- Once a company identifies its risks, perhaps the most common risk management
tactic is to reduce risks by implementing specific controls
Example:
Examples of Controls to Reduce
Examples of Business Risks
Business Risks
Products harming customers evelop a formal and rigorous new
D
● C odes of Conduct on the International Level and Corporate Governance
product testing program
Perspective
- Codes of Conduct on the International Level: In addition to integrity and objectivity, osing market share due to the
L evelop an approach for legally
D
resolution of ethical conflicts, competence, and confidentiality, the IFAC’s unforeseen actions of competitors gathering information about
(International Federation of Accountants) code deals with the accountant’s ethical competitors' plans and practices
responsibilities in: oor weather conditions shutting down D
P evelop contingency plans for for
+ Taxes, operations overcoming weather-related
+ Independence, disruptions
+ Fees and commissions,
Website malfunction horoughly test the website before
T
+ Advertising and solicitation, going "live" on the Internet
+ Handling of monies, and
+ Cross-border activities supplier strike halting the flow of
A stablish a relationship with two
E
raw materials companies capable of providing raw
b) A Corporate Governance Perspective: materials
- The system by which a company is directed and controlled.
inancial statements unfairly reporting C
F ount the physical inventory on hand
the value of inventory to make sure that it agrees with the
accounting records
n employee accessing unauthorized
A reate password-protected barriers
C
information that prohibit employees from obtaining
information not needed to do their jobs
