Chapter 01 – The Changing Role of Managerial Accounting in a Dynamic Business Environment
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CHAPTER 1
THE CHANGING ROLE OF MANAGERIAL
ACCOUNTING IN A DYNAMIC BUSINESS ENVIRONMENT
Learning Objectives
1. Define managerial accounting and describe its role in the management process.
2. Explain four fundamental management processes that help organizations attain
their goals.
3. List and describe five objectives of managerial accounting activity.
4. Explain the major differences between managerial and financial accounting.
5. Describe the accounting and finance structure in an organization.
6. Describe the roles of an organization’s chief financial officer (CFO) or controller,
treasurer, and internal auditor.
7. Understand and explain the value chain concept.
8. Explain how investments in capacity affect managerial decisions making.
9. Discuss the professional organizations and certifications in the field of
managerial accounting.
10. Describe the ethical responsibilities and ethical standards that apply to
managerial accounting.
Chapter 01 – The Changing Role of Managerial Accounting in a Dynamic Business Environment
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Chapter Overview
I. Managing Resources, Activities, and People
A. What is managerial accounting?
B. Management activities
1. Decision making
2. Planning
4. Controlling
II. How Managerial Accounting Adds Value to the Organization
A. Objectives of managerial accounting activity
1. Provides information for decision making and planning
3. Motivates managers and employees
5. Assesses an organization’s competitive position
B. Balanced Scorecard
C. Managerial Versus Financial Accounting
1. Focus of reports
3. Degree of regulation
4. Information focus
D. Managerial Accounting in Different Types of Organizations
III. Where Do We Find Managerial Accountants in an Organization?
A. Organization Chart
2. Chief financial officer (CFO) or controller
4. Internal auditor
B. Cross-functional deployment
C. Physical location
IV. The Operational Context of Managerial Accounting
A. Managerial Accounting and the Value Chain
B. Capacity and Capacity Costs
C. Cost management systems
V. Managerial Accounting as a Career
A. Professional Organizations
B. Professional Certification
VI. Managerial Accounting and the Ethical Climate of Business
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Key Lecture Concepts
I. Managing Resources, Activities, and People
• Types of organizations include manufacturers, retailers, service providers,
agribusinesses, and nonprofit firms. These organizations have goals—for
example: growth, profit, quality, leadership, etc.
• Organizations have information needs in the financial, production,
personnel, environmental, and legal areas. Managerial accounting
• The role of managerial accountants has expanded in recent years.
Managerial accountants are specialists in using the tools of managerial
• Management functions performed within an organization can often be
summarized as decision making, planning, the directing of operational
activities, and controlling.
➢ Decision making—the process of choosing among available
alternatives
Chapter 01 – The Changing Role of Managerial Accounting in a Dynamic Business Environment
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II. How Managerial Accounting Adds Value to the Organization
• Provides managers with information (e.g., product costs, budgets, cash
flows). The information includes financial and nonfinancial data to help
• Motivates managers to achieve the organization’s goals by communicating
• Measures performance not only for the entire organization, as in financial
• Assesses the organization’s competitive position in the rapidly changing
business environment. Looks at how well the firm is doing internally, in
• Managerial Versus Financial Accounting
➢ Financial accounting is intended for external users (investors,
III. Where Do We Find Managerial Accountants in an Organization?
Chapter 01 – The Changing Role of Managerial Accounting in a Dynamic Business Environment
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• Staff personnel (accountants, lawyers, personnel directors, and other
administrative positions) provide support for the organization’s mission.
➢ An accountant in a CPA firm would be in a line position, because
• The treasurer is responsible for raising capital, safeguarding assets,
managing investments, insurance coverage, and the credit policy of an
organization.
IV. The Operational Context of Managerial Accounting
• More attention is being paid to the value chain—the set of linked, value-
creating activities, from conducting product research, to manufacturing, to
providing customer service.
• To achieve an organization’s goals, managers must understand the entire
value chain as well as the related cost-causing factors (cost drivers).
Chapter 01 – The Changing Role of Managerial Accounting in a Dynamic Business Environment
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Capacity is the upper limit on the amount of goods or services that an
organization can produce in a specified period of time. There are various
• The growing use of cost management systems—planning and control
systems that measure the cost of resources and eliminate non-value-
added costs (costs that can be eliminated with no deterioration of product
quality, performance, or perceived value).
V. Managerial Accounting as a Career
• The Institute of Management Accountants (IMA) administers the
VI. Managerial Accounting and the Ethical Climate of Business
• Recent corporate scandals have involved mismanagement, alleged ethical
lapses, and criminal behavior. Causes of these scandals were attributable
to:
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• Various reforms have begun to surface that remedy deficiencies in
corporate governance and accounting. For example, the Sarbanes-Oxley
Act both:
• Professional ethics require high standards of conduct from management
accountants in the areas of competence, confidentiality, integrity, and
credibility.
Teaching Tip: If you plan to highlight ethics throughout the course, you may want
Teaching Overview
The main objective of the first two class meetings is to help students understand the
overall context in which managerial accounting satisfies the information needs of an
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Students have very insightful thoughts on the emerging trends in business today.
Therefore, I try to generate some discussion of their ideas early on. (I also want to
Links to the Text
Homework Grid
Item No.
Learning
Objectives
Completion
Time (min.)
Exercises:
1-25
3, 4
25
1-26
2, 3
20
1-27
1, 3, 5
30
Problems:
1-28
4, 6
30
1-29
4, 5, 6, 8
25
1-30
6, 7, 9, 10
45
1-31
3, 8
25
Cases:
1-32
10
1, 3, 6, 7, 9,
40