1 -1

Class
Meeting

Riwayadi

Introduction:
The Role,
History, and
Direction of
Management
Accounting

1 -2

The managerial accounting system has three

broad objectives:
1. To provide information for costing out
services, products, and other objects of
interest to management.
2. To provide information for planning,
controlling, evaluating, and continuous
improvement.
3. To provide information for decision
making.

Management
Management Accounting
Accounting
Information
Information System
System

Economic
Events

Inputs

1 -3

Collecting
Measuring
Storing
Analyzing
Reporting
Managing

Special Reports
Product Costs
Customer Costs
Budgets
Performance Reports
Personal Communication

Processes

Outputs

Users

1 -4

Management
Management Process
Process
The Management Process is defined by the
following activities:
Planning
Controlling
Decision Making

Planning requires
setting objectives
and identifying
methods to achieve
those objectives.

1 -5

Management
Management Process
Process
The Management Process is defined by the
following activities:
Controlling is
Planning
Controlling
Decision Making

the managerial
activity of
monitoring a
plans
implementation
and taking
corrective action
as needed.

1 -6

Management
Management Process
Process
The Management Process is defined by the
following activities:
Planning
Controlling
Decision Making

Control is
usually achieved
with the use of
feedback.

1 -7

Management
Management Process
Process
Feedback
Feedbackisis information
information
that
that can
can be
be used
used to
to
evaluate
evaluate or
or correct
correct the
the
steps
steps being
being taken
taken to
to
implement
implement aa plan.
plan.

1 -8

Management
Management Process
Process
The Management Process is defined by the
following activities:
Planning
Controlling
Decision Making

Decision
making is
the process
of choosing
among
competing
alternatives.

1 -9

Differentiate Between
Management Accounting and
Financial Accounting

Management
ManagementAccounting
Accounting

1. Internally focused

Financial
FinancialAccounting
Accounting

1. Externally focused

1 -10

1 -11

Targeted
Targeted Users
Users
Management
accounting
focuses on
providing
information for
internal users.

1 -12

Targeted
Targeted Users
Users

ABC
Company
Annual
Report

Financial
Financial
accounting
accounting focuses
focuses
on
on provided
provided
information
information for
for
external
external users.
users.

Management
ManagementAccounting
Accounting

1. Internally focused
2. No mandatory rules

Financial
FinancialAccounting
Accounting

1 -13

1. Externally focused
2. Must follow externally
imposed rules

1 -14

Restrictions
Restrictions on
on Inputs
Inputs and
and Processes
Processes
Management
accounting
isis not
Management
accounting
not
Financial
accounting
reporting
must
Financial
accounting
reporting
must
subject
to
the
requirements
of
subject
to the requirements
of set
follow
the
accounting
procedures
follow
the accounting
procedures set
generally
accepted
accounting
generally
accepted
accounting
by
the
SEC
and
the
FASB.
by the SEC
and
the
FASB.
principles.
principles.

Management
ManagementAccounting
Accounting

1. Internally focused
2. No mandatory rules
3. Financial and
nonfinancial information; subjective
information possible

Financial
FinancialAccounting
Accounting

1 -15

1. Externally focused
2. Must follow externally
imposed rules
3. Objective financial
information

1 -16

Types of Information
For
The
management
restrictions
imposed
For
The
management
restrictionsaccounting,
accounting,
imposed on
onthe
the
financial
financial
accounting
or
tend
financial
financial
accounting
or nonfinancial
nonfinancial
tend to
to
produce
information
objective
may
and
much
verifiable
more
produce
information
objective
may be
be
and
much
verifiable
more
financial
subjective
information.
in
financial
subjective
information.
in nature.
nature.

Management
ManagementAccounting
Accounting

1. Internally focused
2. No mandatory rules
3. Financial and
nonfinancial information; subjective
information possible
4. Emphasis on the future

Financial
FinancialAccounting
Accounting

1 -17

1. Externally focused
2. Must follow externally
imposed rules
3. Objective financial
information
4. Historical orientation

1 -18

Time
Time Orientation
Orientation
Management
accounting strongly
emphasizes providing
information about
future events.

1 -19

Time
Time Orientation
Orientation
Financial
accounting records
and reports events
that have already
happened.

Management
ManagementAccounting
Accounting

1. Internally focused
2. No mandatory rules
3. Financial and
nonfinancial information; subjective
information possible
4. Emphasis on the future
5. Internal evaluation and
decisions based on very
detail information

Financial
FinancialAccounting
Accounting

1 -20

1. Externally focused
2. Must follow externally
imposed rules
3. Objective financial
information
4. Historical orientation
5. Information about the
firm as a whole

1 -21

Degree
Degree of
of Aggregation
Aggregation
Management
accounting provides
measures and internal
reports used the
evaluate performance of
entities, product lines,
departments, and
managers.

1 -22

Degree
Degree of
of Aggregation
Aggregation
Financial
accounting focuses
on overall firm
performance.

Management
ManagementAccounting
Accounting

1. Internally focused
2. No mandatory rules
3. Financial and
nonfinancial information; subjective
information possible
4. Emphasis on the future
5. Internal evaluation and
decisions based on very
detail information
6. Broad, multidisciplinary
(Eco, Quantitative,

Financial
FinancialAccounting
Accounting

1 -23

1. Externally focused
2. Must follow externally
imposed rules
3. Objective financial
information
4. Historical orientation
5. Information about the
firm as a whole
6. More self-contained
(economics)

1 -24

Breadth
Breadth
ItIt includes
aspects
of
managerial
includes
aspects
of
managerial
Management
accounting
isis much
Management
accounting
much
economics,
industrial
engineering,
economics,
industrial
engineering,
broader
than
financial
accounting.
broader
than
financial
accounting.
and
management
science.
and management science.

Historical Description of
Management Accounting
1880 - 1925

Most of the product-costing and internal

accounting procedures used in this century
were developed

1925

Emphasis of inventory costing for external

reporting

1950s/60s

Effort to improve the managerial usefulness

of traditional cost systems

1980s/90s

Significant efforts have been made to

radically change the nature and practice of
management accounting

1 -25

1 -26

Current
Current Focus
Focus of
of Management
Management Accounting
Accounting
Activity-Based
Activity-Based Management
Management

Activity-based management is a system

wide, integrated approach that focuses
managements attention on activities with the
objective of improving customer value and
the resulting profit.

1 -27

Current
Current Focus
Focus of
of Management
Management Accounting
Accounting
Customer
Customer Orientation
Orientation

Customer value is the difference between

what the customer receives (customer
satisfaction) and what the customer gives up
(customer sacrifice).
What is received is called the total product.

1 -28

Current
Current Focus
Focus of
of Management
Management Accounting
Accounting
Strategic
Strategic Positioning
Positioning

Strategic cost management is the use of cost data

to develop and identify superior strategies that
will produce a sustainable competitive advantage.

Strategies:
1) Cost leadership
2) Superior products through differentiation

1 -29

Current
Current Focus
Focus of
of Management
Management Accounting
Accounting
Value-Chain
Value-Chain Framework
Framework

The internal value chain is the set of activities

required to design, develop, produce, market,
and deliver products and services to customers.
The industrial value chain is the linked set of
value-creating activities from basic raw
materials to the disposal to the final products by
end-use customers.

1 -30

Planting and
Cultivating

Value Chain:
Apple Industry

Harvesting

Firm
B

Distribution of
Apples

Firm
A

Applesauce
Production

Product Disposal

Applesauce
Distribution

End-Use Customer

Supermarkets

Firm
C

1 -31

Managing
Managing the
the value
value chain
chain means
means
that
that aa management
management accountant
accountant
must
must understand
understand many
many functions
functions
of
of the
the business,
business, from
from
manufacturing
manufacturing to
to marketing.
marketing.

1 -32

This
This emphasis
emphasis on
on quality
quality has
hascreated
created
aa demand
for
management
demand
for
management
The
philosophy
of
total
quality
The
philosophy
of
total
quality
accounting
systems
that
provide
accounting
systems
that provide
management
is
to
manufacture
management
isnonfinancial
to manufacture
financial
and
financial
and products.
nonfinancial
perfect
perfect
products.
information
information about
about quality.
quality.

1 -33

The
The role
role of
of
management
management
accountants
accountants in
in an
an
organization
organization isis one
one
of
of support.
support.

THE ROLE OF MANAGEMENT

ACCOUNTANT
In the organization, management accountant is in the staff
position, that is, position that is supportive in nature and
has only indirect responsibility for an organizations basic
objectives. Line positions (production & marketing
manager) are the positions that have direct responsibility
for the basic objectives of organization
The role of management accountant is to assist the
individuals who responsible for carrying out an
organizations basic objectives.

1 -34

Partial Organization Chart,

Manufacturing Company

1 -35

President
Line Function

Staff Function

Production
Vice President

Financial
Vice President

Production
Supervisor

Machining
Foreman

Assembly
Foreman

Controller

Internal
Audit

Cost

Financial

Treasurer

Systems

Tax

1 -36

Ethical
Ethical
Behavior
Behavior
Michael Josephsons* Ten Ethical Values:
Honesty
Caring for others
Integrity

Respect for others

Promise keeping
Fidelity

Responsible
citizenship

Fairness

Pursuit of excellence
Accountability

*Michael Josephson, Teaching Ethical Decision Making and Principled

Reasoning

1 -37

Professional
Professional Certifications
Certifications
CMA: One of the main purposes of the CMA was to establish
management accounting as a recognized, professional
discipline, separate from the profession of public
accounting.
CPA: The responsibility of a CPA is to provide assurance
concerning the reliability of financial statements.
CIA: The focus of the CIA is to recognize competency in
internal auditing rather than external auditing as with
the CPA.

1 -38

The
The CMA
CMA
Four areas emphasized on the exam:
1) Economics, finance, and management
2) Financial accounting and reporting
3) Management report, analysis, and behavioral
issues
4) Decision analysis and information systems