CH. 1 Managerial Accounting

What is the CONTROLLER?

(chief accounting officer) She supervises all accounting functions and reports directly to the general manager and chief operating officer (COO). Although managerial accounts such as controllers and cost accounting managers, may wield considerable influence in the organization, they have no authority over the managers in the production area.

What is a CERTIFIED MANAGEMENT ACCOUNTANT (CMA)?

A (CMA) has passed a rigorous qualifying examination, met an experience requirement, and participates in continuing education. One of the key requirements for obtaining the CMA is passing a qualifying examination.

What is TOTAL QUALITY MANAGEMENT?

A philosophy of total quality management, in which manufacturers strive to create an environment that will enable workers to manufacture perfect (zero-defect) products, has replaced the "acceptable quality" attitudes of the past.

Explain Customer Orientation.

Customer value is a key focus because firms can establish a competitive advantage by creating better customer value for the same or lower cost than competitors or creating equivalent value for lower cost than that of competitors. Customer value is the difference between what a customer receives and what the customer gives up when buying a product or service.

Explain Strategic Positioning

Effective cost information can help the company identify strategies that increase customer value and, in so doing, create a sustainable competitive advantage. Generally, firms choose one of two general strategies: 1. Cost leadership: The objective of the cost leadership strategy is to provide the same or better value to customers at a lower cost than competitors. 2. Superior products through differentiation (e.g., highest performance quality, most desired product features, best customer service, etc.): A differentiation strategy strives to increase customer value by providing something to customers not provided by competitors. For example, Best Buy's Geek Squad of computer technicians creates a competitive advantage for Best Buy by providing 24-hour-in-home technical assistance for its customers. Accurate cost information is important to see whether or not the additional service provided by the Geek Squad adds more to revenue than it does to cost.

What is FINANCIAL ACCOUNTING?

FINANCIAL ACCOUNTING is primarily concerned with producing information (financial statements) for external users, including investors, creditors, customers, suppliers, government agencies (Food and Drug Administration, Federal Communications Commission, etc.) and labor unions. This information has a historical orientation and is used for such things as investment decisions, stewardship evaluation, monitoring activity, and regulatory measures.

What is enterprise risk management (ERM)?

Finally, one of the more recent charges of managerial accountants is to help carry out the company's enterprise risk management (ERM) approach. ERM is a formal way for managerial accountants to identify and respond to the most important threats and business opportunities facing the organization. ERM is becoming increasingly important for long-term success. For example, it is well recognized that Wal-Mart's expert crisis management processes and teams repeatedly responded to the aftermath of Hurricane Katrina throughout Louisiana and Mississippi better and faster than did either local or federal government agencies (e.g., FEMA). The results of many public accounting firm surveys, as well as the Institute of Management Accountants, highlight the growing importance that organizations place on conducting effective risk management practices.

A comparison of financial and managerial accounting.

Financial accounting Managerial accounting -Externally focused -Internally focused -Must follow externally imposed rules. -Objective financial info. -No mandatory rules -Historical orientation -Financial and non -Information about the firm financial info; subjective -More self contained. information possible -Emphasis on the future -Internal evaluation and and decions based on detailed information -broad, multidisciplinary

Who is the treasurer?

He is responsible for the finance function. Specifically, the treasurer raises capital and manages cash and investments. The treasurer may also be in charge of credit and collection and insurance.

What is a CERTIFIED INTERNAL AUDITOR?

Internal auditing differs from external auditing and managerial accounting, and many internal auditors felt a need for a a specialized certification. The Certified Internal Auditor (CIA) has passed a comprehensive examination designed to ensure technical competence and has 2 years' experience.

Explain ETHICAL BEHAVIOR.

It involves choosing actions that are right, proper, and just.

What are the information needs of managers and other users?

Managerial accounting information is needed by a number of individuals. In particular, managers and empowered workers need comprehensive, up-to-date information for the following activities: planning, controlling, and decision making.

What is CONTROLLING?

Once a plan is created, it must be implemented and its implementation monitored by managers and workers to ensure that the plan is being carried out as intended. The managerial activity of monitoring a plan's implementation and taking corrective action as needed is referred to as CONTROLLING. Control is usually achieved by comparing actual performance with expected performance. This information can be used to evaluate or to correct the steps being taken to implement a plan.

What is a (CPA)?

The Certificate in Public Accounting is the oldest and most well-known certification in accounting. The purpose of the certificate is to provide minimal professional qualification for external auditors. The responsibility of auditors is to provide assurance concerning the reliability of a firm's financial statements. Only a Certified Public Accountant (CPA) is permitted (by law) to serve as an external auditor.

What is PLANNING?

The detailed formulation of action to achieve a particular end is the management activity called PLANNING. Planning requires setting objectives and identifying methods to achieve those objectives.

What does managerial accounting do?

The managerial accounting system produces information for internal users, such as managers, executives and workers. Thus, managerial accounting could be properly called internal accounting, and financial accounting could be called external accounting. Specifically, managerial accounting identifies, collects, measures, classifies, and reports financial and nonfinancial information that is useful to internal users in planning, controlling, and decision making.

What is DECISION MAKING?

The process of choosing among competing alternatives is called DECISION MAKING. This managerial function is intertwined with planning and control in that a manager cannot successfully plan or control the organization's actions without making decisions regarding competing alternatives. One of the major roles of the managerial accounting information system is to supply information that facilitates decision making.

What is the difference between managerial and financial accounting?

Unlike financial accounting, managerial accounting is not bound by any formal criteria such as generally accepted accounting principles (GAAP). Managerial accounting has 3 broad objectives: 1. To provide information for planning the organization's actions. 2. To provide information for controlling the organization's actions. 3. To provide information for making effective decisions.

What is Activity-based costing (ABC)?

is a more detailed approach to determining the cost of goods and services. ABC improves costing accuracy by emphasizing the cost of many activities or tasks that must be done to produce a product to offer a service. UPS used ABC to discover and manage the cost of the activities involved with shipping packages by truck, as opposed to by plane, in order to bead FedEx at its overnight delivery business in quick mid-distance (up to 500 miles) overnight deliveries. Process-value analysis focuses on the way in which companies create value for customers. The objective is to find ways to perform necessary activities more efficiently and to eliminate those that do not create customer value.

What is LEAN ACCOUNTING?

organizes costs according to the value chain and collects both financial and non financial information.

What is CONTINUOUS IMPROVEMENT?

the continual search for ways to increase the overall efficiency and productivity of activities by reducing waste, increasing quality, and managing costs. Managerial accounting information about the costs of products, customers, processes, and other objects of management interest can be the basis for identifying problems and alternative solutions.

What is Managerial accounting?

the provision of accounting information for a company's internal users. It is the firm's internal accounting system and is designed to support the information needs of managers.

What is the Value Chain?

the set of activities required to design, develop, produce, market, and deliver products and services, as well as provide support to customers.