horngren_ima16_stppt01

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Chapter
Chapter 11
Managerial Accounting, the
Business Organization, and
Professional Ethics
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Chapter 1 Learning Objectives
When you have finished studying this chapter,
you should be able to:
1. Explain why accounting is essential for
decision makers and managers.
2. Describe the major users and uses of
accounting information.
3. Explain the role of budgets and performance
reports in planning and control.
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Chapter 1 Learning Objectives
4. Describe cost-benefit and behavioral
issues involved in designing an accounting
system.
5. Discuss the role accountants play in the
company’s value-chain functions.
6. Identify current trends in management
accounting.
7. Explain why ethics and standards of ethical
conduct are important to accountants.
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Learning
Objective 1
Why Accounting is Essential for
Decision Makers and Managers
Accounting information is used in
decision making for planning and
control.
Planning
describes how the
organization will
achieve its
objectives.
Control is the process
of implementing plans
and evaluating if
objectives are
achieved.
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Users of Accounting Information
Management
Accounting
Process of identifying,
measuring, accumulating,
analyzing, preparing,
interpreting, and
communicating
information used by:
Managers
Financial
Accounting
Develops
information for
external decision
makers:
Stockholders,
Suppliers,
Banks, Government
Authorities
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Management Accounting and Your Career
The Certified Management Accountant (CMA)
CMAs must pass an examination covering
(1)Financial planning, performance
and control, and
(2) Financial decision making.
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Learning
Objective 2
Roles of Accounting Information
Accounting Information System
Process of gathering, organizing, and
communicating financial information
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Roles of Accounting Information
Scorekeeping:
Evaluate
organizational
performance
Attention Directing:
Compare actual
results to expected
Problem Solving:
Assess possible
courses of action
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Planning and Control
Accounting information helps managers
plan and control the organization’s operations.
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
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Learning
Objective 3
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
Mayfair Starbucks Store, March 31, 20X1
Sales
Less:
Ingredients
Store labor
Other labor
Utilities, etc.
Total expenses
Operating income
Budget
$50,000
Actual
$50,000
Variance
0
22,000
12,000
6,000
4,500
$44,500
$ 5,500
24,500
11,600
6,050
4,500
$46,650
$ 3,350
$2,500 U
400 F
50 U
0
$2,150 U
$2,150 U
U= Unfavorable – actual exceeds budget
F – Favorable – actual is less than budget
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Influences on Accounting Systems
Generally accepted accounting principles (GAAP)
Foreign Corrupt Practices Act
Internal controls
Internal auditors
Sarbanes-Oxley Act
Management audits
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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 company’s financial statements.
External auditors must examine and report
on the company’s internal control system.
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Learning
Objective 4
Cost-Benefit and Behavioral
Considerations
Cost-benefit
balance
Behavioral
implications
The system must provide accurate, timely budgets
and performance reports in a form useful to managers.
Weigh estimated
costs against
probable benefits.
Managers must use accounting
reports, or the reports
create no benefits.
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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
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Low sales  No sales
Phase out
Product
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Learning
Objective 5
The Value Chain
Customer
Service
Research
and
Development
Product
And
Service
or
Process
Design
Customer
Focus
Distribution
Marketing
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Production
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Accounting’s Position in the Organization
Management accountant’s role as consultant
Collects
and compiles
information
Interprets and
analyzes information
Prepares
standardized
reports
Is involved
in decision making
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Line and Staff Authority
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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Controller and Treasurer Function
Chief Financial Officer (CFO)
Controller Functions
 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)
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Learning
Objective 6
Current Trends in
Management Accounting
Adaption to changes:
Shifting from a manufacturing-based
to a service-based economy
Increased global competition
Advances in technology
Changes in business processes
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Current Trends in Management
Accounting
The service sector now accounts for more
than 80% of the employment in the United
States.
Common characteristics of service
organizations
1. Labor is a major component of costs.
2. Output is usually difficult to measure.
3. Service organizations cannot store their
major inputs and outputs.
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Major Influences on Management
Accounting
Advances in technology:
E-commerce
Enterprise resource planning (ERP)
B2C and B2B
Business process reengineering:
Just-in-time (JIT) philosophy
Lean manufacturing
Computer-integrated manufacturing
Six sigma
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Learning
Objective 7
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.
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IMA Statement of Ethical Professional Practice
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IMA Statement of Ethical Professional Practice (cont’d)
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Ethics
Reliability
Trust
Integrity
No regulation can be as effective
in ensuring reliability as high
ethical standards of accountants.
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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
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: Downturn markets reveal what an
upturn market conceals. Vigilance in all stages of
economic markets maintains high ethical standards.
4. Accounting rules:
Avoid creative interpretations of the rules. Practice
full and fair disclosure to convey company’s
performance.
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publication may be reproduced, stored in
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form or by any means, electronic,
mechanical, photocopying, recording, or
otherwise, without the prior written
permission of the publisher. Printed in
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