Prologue Lecture Notes
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Prologue
Lecture Notes
Prologue theme: This prologue explains why managerial
accounting is important to the future careers of all
business students. It answers two questions: (1) what is
I. What is managerial accounting?
A. Financial and managerial accounting: seven key
differences
i. Users
1. Financial accounting reports are prepared
1. Financial accounting data should be
objective and verifiable. Managerial
Prologue Lecture Notes
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objective or verifiable.
iv. Less emphasis on precision
2. Financial accounting focuses on precision
when reporting to external parties.
3. Financial accounting is concerned with
imposed rules
4. Financial accounting conforms to GAAP
5. Financial accounting is mandatory because
various outside parties require periodic
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1. Planning involves establishing goals and
specifying how to achieve them.
ii. Controlling
1. Controlling involves gathering feedback to
ensure that the plan is being properly
executed or modified as circumstances
1. Decision making involves selecting a
course of action from competing
alternatives.
Prologue Lecture Notes
II. Why does managerial accounting matter to your career?
A. Business majors
i. Marketing majors
1. Planning
a. How much should we budget for TV,
2. Controlling
a. Is the budgeted price cut increasing
unit sales as expected?
3. Decision making
a. Should we sell our services as one
1. Planning
a. How many units should we plan to
2. Controlling
a. Did we spend more or less than
expected for the units we actually
produced?
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3. Decision making
a. Should we transfer production of a
iii. Human resource management majors
1. Planning
a. How much should we plan to spend for
2. Controlling
a. Is our employee retention rate
exceeding our goals?
3. Decision making
a. Should we hire an on-site medical staff
B. Accounting majors
i. The IMA estimates that more than 80% of
professional accountants in the United States
work in non-public accounting
environments.
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iii. This employer will expect you to have strong
financial accounting skills, but more
iv. For accounting majors, the Certified
Management Accountant (CMA)
designation is a globally-respected credential
that will increase your credibility, upward
mobility, and compensation.
v. This slide summarizes the topics included in
the two-part CMA exam. The CMA focuses
vi. Information about becoming a CMA and the
CMA program can be accessed on the IMA’s
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Prologue Lecture Notes
III. Managerial accounting: beyond the numbers
A. Measurement skills
i. The primary purpose of this course is to teach
ii. Measurement skills help managers answer
questions such as:
1. What net income should my company report
iii. However, managers need to complement their
B. An ethics perspective
i. The IMA’s Statement of Ethical
Professional Practice: guidelines for ethical
behavior
1. Competence
a. Maintain professional competence.
b. Follow applicable laws, regulations,
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2. Confidentiality
a. Do not disclose confidential
information unless legally obligated to
3. Integrity
a. Mitigate conflicts of interest and
4. Credibility
a. Communicate information fairly and
objectively.
b. Disclose all relevant information that
ii. The IMA’s Statement of Ethical
Professional Practice: guidelines for
resolution of an ethical conflict
1. Follow the organization’s established
policies for resolving ethical conflict. If this
does not work, consider the following:
a. Discuss the conflict with immediate
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Prologue Lecture Notes
d. Except where legally prescribed,
communication with individuals not
employed by the organization is not
appropriate.
iii. Ethical standards are motivated by a very
practical consideration—if the standards are
not followed in business, then the economy
and all of us would suffer.
C. A strategic management perspective
i. Definition
1. A strategy is a “game plan” that enables a
company to attract customers by distinguishing
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ii. Customer value propositions
1. Companies that adopt a customer intimacy
strategy respond to individual customer
needs better than competitors. Examples of
3. Companies that adopt a product leadership
strategy strive to offer higher quality
products than competitors. Examples of
companies that pursue this strategy include:
a. Apple, Cisco Systems, and W.L. Gore
D. Enterprise risk management
i. Enterprise risk management is a process
used by a company to proactively identify the
Prologue Lecture Notes
1. This slide contains a subset of the business
risks and controls shown in Exhibit P-7 of
E. A corporate social responsibility perspective
i. Corporate social responsibility (CSR) is a
concept whereby organizations consider the
needs of all stakeholders when making
1. This slide presents examples of corporate
social responsibilities that are of interest to
the six stakeholder groups just mentioned.
F. Process management skills
i. Key definitions
1. A business process is a series of steps that
are followed in order to carry out some task
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ii. Lean production is a management approach
that organizes resources such as people and
1. Lean production is often called just–in-time
(JIT) production because products are only
made in response to customer orders and
they are completed just–in-time to be
shipped to customers.
2. Traditional manufacturing methods organize
G. A leadership perspective
i. To be an effective leader, you’ll need to
understand how intrinsic motivation, extrinsic
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