Type:
Solution Manual
Resource:
Introduction to Management Accounting
Edition:
17th Edition
Author(s):
Charles T. Horngren Gary L. Sundem William O. Stratton Dave Burgstahler Jeff O. Schatzberg
Chapter 1 Managerial Accounting, the Business Organization, and Professional Ethics LEARNING OBJECTIVES: When your students have finished studying this chapter, they should be able to: 1. 2. 3. 4. 5. 6. 7.
Explain why accounting is essential for decision makers and managers. Describe the major users and uses of accounting information. Explain the role of budgets and performance reports in planning and control. Describe the cost-benefit and behavioral issues involved in designing an accounting system. Discuss the role accountants play in the company’s value-chain functions. Identify current trends in management accounting. Explain why ethics and standards of ethical conduct are important to accountants.
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CHAPTER 1:
ASSIGNMENTS
CRITICAL THINKING EXERCISES 28. Finance and Management Accounting 29. Accounting’s Position in the Organization: Controller and Treasurer 30. Marketing and Management Accounting 31. Production and Management Accounting EXERCISES 32. Management Accounting and Financial Accounting 33. Planning and Control, Management by Exception 34. Line Versus Staff and Value Chain Responsibility 35. Microsoft’s Value Chain 36. Objectives of Management Accounting 37. Cost-Benefit of the Ethical Environment 38. Early Warning Signs of Ethical Conduct PROBLEMS 39. Management and Financial Accounting 40. Use of Accounting Information in Hospitals 41. Costs and Benefits 42. Importance of Accounting 43. Changes in Accounting Systems 44. Value Chain 45. Role of Controller 46. The Accountant’s Role in an Organization 47. Ethics and Accounting Personnel 48. Ethical Issues 49. Hundred Best Corporate Citizens CASES 50. 51. 52.
Line and Staff Authority Professional Ethics and Toxic Waste Information in Nike’s 10k Report
EXCEL APPLICATON EXERCISE 53. Budgets and Performance Evaluation COLLABORATIVE LEARNING EXERCISE 54. The Future Management Accountant INTERNET EXERCISE 55. Institute of Management Accountants (www.ifac.org)
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CHAPTER 1: I.
OUTLINE
Management Accounting and Your Career A.
{L. O. 1}
Certified Management Accountant Financial accounting has long provided auditing positions that are typically staffed by Certified Public Accountants (CPAs) in the United States and chartered accountants (CAs) in many other nations. The certified management accountant (CMA) designation is the management accountant’s counterpart to the CPA. There are three key professional qualifications providing routes into accounting: ACA (Institute of Chartered Accountants), ACCA (Association of Chartered Certified Accountants), and CIMA (Chartered Institute of Management Accountants). Each of these qualifications is globally recognized. Each course can take 3 to 5 years.
B.
Training for Top Management Positions In addition to preparing you for a position in an accounting department, studying accounting, and working as a management accountant, can prepare you for the very highest levels of management, such as CEO. Users of Accounting Information In general, users of accounting information fall into two general categories. 1. Internal managers who use information for day-to-day operating decisions and for long-range strategic decisions, and 2. External parties, such as investors and government authorities, who use the information for making decisions about the company. The internal managers make use of Management Accounting information whereas the external parties make use of Financial Accounting information. See EXHIBIT 1-1 for the major distinctions between these two types of accounting information.
II.
Roles of Accounting Information A.
{L. O. 2}
Accounting System—a formal mechanism for gathering, organizing, and communicating information about an organization’s activities. A good accounting system helps an organization achieve its goals and objectives by helping to answer three types of questions. 1. 2.
Scorecard Questions (Am I doing well or poorly?)—accumulation and classification of data, Attention-Directing Questions (Which problems should I look into?)— focuses on operating problems and opportunities, and
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3.
III.
Problem-Solving Questions (Of the several ways of doing the job, which one is best?)—quantifies the likely results of possible courses of action for long-range planning.
Management by Exception A.
{L. O. 3}
The Nature of Planning and Controlling The management process is a series of activities in a cycle of planning and control with Decision Making—the purposeful choice from among a set of alternative courses of action designed to achieve some objective, as the core. Planning—the setting of objectives and outlining how they will be attained. Controlling—the implementation of plans and using feedback to attain objectives. Planning determines action, action generates feedback, and feedback influences further planning and possible corrective actions. EXHIBIT 1-2 shows that the accounting system formalizes plans by expressing them as budgets. A budget is a quantitative expression of a plan of action. Budgets are the chief devices for compelling and disciplining management planning. Performance Reports—provide feedback by comparing results with plans and by highlighting Variances (i.e., deviations from plans). The accounting system records, measures, and classifies actions in order to produce performance reports. See EXHIBIT 1-3 for an example of a performance report for a hypothetical store, the Mayfair Starbucks. Management by Exception—concentrating on areas that need attention and ignoring areas that appear to be running smoothly. Managers use performance reports to investigate exceptions (i.e., items for which actual amounts differ significantly from budgeted amounts). Operations are then brought into conformity with plans, or the plans are revised.
B.
Influences on Accounting Systems An accounting system is a formal mechanism for gathering, organizing, and communicating information about an organization’s activities. In the European Union and more than 100 countries worldwide, companies must comply with International Financial Reporting Standards (IFRS). In the United States (and select other countries), reports for external users are bound by generally accepted accounting principles (GAAP) and legal requirements. The auditor must make a judgment as to whether the financial statements of the company comply with the approved accounting standard and that they are a true and fair view of the situation. The auditor’s role is to express an opinion on the financial statements; it is the responsibility of the company directors to prepare and present the financial statements and to set in place any internal controls, policies to protect
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