Lecture Accounting principles (8th edition) – Chapter 19: Managerial accounting
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Chapter
19-1
CHAPTER 19
MANAGERIAL
ACCOUNTING
Accounting Principles, Eighth Edition
Chapter
19-2
Study Objectives
Study Objectives
1.
Explain the distinguishing features of managerial accounting.
2.
Identify the 3 broad functions of management.
3.
Define the 3 classes of manufacturing costs.
4.
Distinguish between product and period costs.
5.
Explain the differences between a merchandising and a
manufacturing income statement.
Chapter
19-3
Study Objectives
Study Objectives
Chapter
19-4
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.
Preview of Chapter
Preview of Chapter
Managerial Accounting Basics
Compare managerial and financial accounting
Management functions and Business Ethics
Managerial Cost Concepts
Manufacturing costs
Product vs. period costs
Manufacturing Costs in Financial Statements
Income Statement and Balance Sheet
Cost concepts – A review
Managerial Accounting Today
Service industry trends
Chapter
19-5
Managerial accounting practices
Managerial Accounting
Managerial Accounting
Managerial
Managerial
Accounting
Accounting
Basics
Basics
Compare
Managerial and
Financial
Accounting
Management
Functions
Business Ethics
Chapter
19-6
Managerial
Managerial
Cost
Cost
Concepts
Concepts
Manufacturing
Costs
Product vs
Period Costs
Manufacturing
Manufacturing
Costs
Costsin
in
Financial
Financial
Statements
Statements
Income
Statement
Balance Sheet
Cost Concepts
– A Review
Managerial
Managerial
Accounting
Accounting
Today
Today
Service
Industry
Trends
Managerial
Accounting
Practices
Managerial Accounting Basics
Managerial Accounting Basics
Definition of Managerial Accounting
A field of accounting that provides economic and financial
information for managers and other internal users.
Also called Management Accounting
Chapter
19-7
Managerial Accounting Basics
Managerial Accounting Basics
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)
Chapter
19-8
Managerial Accounting Basics
Managerial Accounting Basics
Managerial 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)
Chapter
19-9
Managerial Accounting Basics
Managerial Accounting Basics
Distinguishing Features
Applies to all types of business
Service, Merchandising, and Manufacturing
Applies to all forms of businesses –
Proprietorships, Partnerships, and Corporations
Applies to notforprofit and profit oriented companies
Chapter
19-10
LO 1 Explain the distinguishing features of managerial accounting.
Managerial Accounting Basics
Managerial Accounting Basics
Distinguishing Features: Continued
More responsible for strategic
cost management
Teams with people from production,
marketing, engineering, etc.
Aid in making critical decisions
Chapter
19-11
LO 1 Explain the distinguishing features of managerial accounting.
Comparing Managerial and Financial Accounting
Comparing Managerial and Financial Accounting
Similarities
Both deal with economic events of a business –
Thus, interests overlap
Both require that economic events be
quantified and communicated to
interested parties –
Determining unit cost is part of
managerial accounting,
Reporting cost of goods manufactured
is a part of financial accounting
Chapter
19-12
LO 1 Explain the distinguishing features of managerial accounting.
Comparing Managerial and Financial Accounting
Comparing Managerial and Financial Accounting
Differences
Chapter
19-13
LO 1 Explain the distinguishing features of managerial accounting .
Managerial Accounting Basics
Managerial Accounting Basics
Review Question
Managerial accounting:
a.
Pertains to the entity as a whole and is highly aggregated.
Pertains to the entity as a whole and is highly aggregated
b. Places emphasis on specialpurpose information.
c. Is limited to cost data.
d. Is governed by generally accepted accounting principles.
Chapter
19-14
LO 1 Explain the distinguishing features of managerial accounting.
Managerial Accounting Basics
Managerial Accounting Basics
Management Functions
Management’s activities and responsibilities can be classified into
the following three broad functions:
Planning
Chapter
19-15
Directing
Controlling
LO 2 Identify the 3 broad functions of management.
Management Functions
Management Functions
Planning
Look ahead and establish objectives such as –
Maximize shortterm profit
Commit 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
Chapter
19-16
LO 2 Identify the 3 broad functions of management.
Management Functions
Management Functions
Directing
Coordinate diverse activities and human resources
Implement planned objectives
Provide incentives to motivate employees
Hire and train employees including
executives, managers, and supervisors
Produce smoothrunning operation
Chapter
19-17
LO 2 Identify the 3 broad functions of management.
Management Functions
Management Functions
Controlling
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.
Chapter
19-18
LO 2 Identify the 3 broad functions of management.
Good Ethics – Good Business
Good Ethics – Good Business
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
Chapter
19-19
Good Ethics – Good Business
Good Ethics – Good Business
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.
Chapter
19-20
Good Ethics – Good Business
Good Ethics – Good Business
Code of Ethical Standards
SarbanesOxley 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
Chapter
19-21
Management Functions
Management Functions
Review Question
The management of an organization performs several broad functions.
They are:
a.
Planning, directing, and selling.
Planning, directing, and selling
b. Directing, manufacturing, and controlling.
c. Planning, manufacturing, and controlling.
d. Planning, directing, and controlling.
Chapter
19-22
LO 2 Identify the 3 broad functions of management.
Managerial Cost Concepts
Managerial Cost Concepts
Manufacturing Costs
Manufacturing consists of activities to convert raw
into finished goods.
In contrast, a merchandising firm sells goods in the
which they were bought.
materials
form in
Categories of manufacturing costs include:
Chapter
19-23
LO 3 – Define the three classes of manufacturing costs.
Manufacturing Costs
Manufacturing Costs
Materials
Raw Materials
Basic materials used in manufacturing
Direct Materials
Raw materials that can be physically and directly associated
with the finished product
Chapter
19-24
LO 3 Define the three classes of manufacturing costs.
Manufacturing Costs
Manufacturing Costs
Materials
Indirect Materials
Raw materials that cannot be easily associated with the
finished product
Not physically part of the finished product or they are an
insignificant part of finished product in terms of cost
Considered part of manufacturing overhead
Chapter
19-25
LO 3 Define the three classes of manufacturing costs.
