BUS 215; Banfield, Week 1 Chapter 1 Notes
BUS 215; Banfield, Week 1 Chapter 1 Notes BUS 215
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This 9 page Class Notes was uploaded by Charissa Loo on Friday April 15, 2016. The Class Notes belongs to BUS 215 at California Polytechnic State University San Luis Obispo taught by BanField in Spring 2016. Since its upload, it has received 18 views. For similar materials see Managerial Accounting in Business at California Polytechnic State University San Luis Obispo.
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BUS 215 CH 1 Managerial Accounting: an overview Chapter explains why managerial accounting is important: What is it? Why does it matter to your career Ethics, strategic management and leadership I. What is Managerial accounting? A. Financial accounting is concerned with reporting financial info to external info to external parties, such as stockholders, creditors, and regulatorManagerial accounting is concerned with providing info to managers for use within the organization. B. Exhibit 11 summaries 7 key diff bw the two ■ A segment is a part or activity of an organization about which managers would like cost, revenue, or profit data. Ex: product lines, customer groups (by age, ethnicity, gender, volume purchases), geographic territories ■ Managerial, inside organization for: ● Planning involves establishing goals and specifying how to achieve them. ● Controlling involves gathering feedback to ensure that the plan is being properly executed or modified as competing alternatives. ● Decision making selecting a course of action from competing alternatives C. Planning ■ Begin by establishing a goal such as: our goal is to recruit the “best and brightest” college grads. Next stage of planning process would req specifying how to achieve this goal by answering numerous ?s such as: ● How many stud do we need to hire total from each maj? ● What schools do we plan to incl in our recruiting? ● Which employees will be involved in each recruiting? ● When conduct interviews? ● How will we compare students for extended job offers? ● What salary to offer? Salaries differ from major? ● How much money can we spend on recruiting? ■ Plans are followed by a budget ● A budget is a detailed plan for the future that is usually expressed in formal quantitative terms ● Two key components: (1) Have to work w other senior managers inside the comp to establish a budgeted amount of total salaries that can be offered for new hires (2) Create a budget that quantifies how much you intend to spend on your campus recruiting acts. D. Controlling ■ Involves gathering, evaluating, and responding to the feedback to ensure that this year’s recruiting process meets expectations. ■ Evaluating the feedback in search of ways to run a more effective recruiting campaign next yr. Control process would involve answering ?s such as: ● Did we succeed in hiring planned # within each major at each school? ● Did we lose too many exceptional candidates to competitors? ● Etc. ■ Part of control process includes preparperformance reports.A performance report compares budgeted data to actual data in an effort to identify fn learn from excellent performance and to identify and eliminate sources of unsatisfactory performance. They can be used as one of many inputs to help evaluate/reward employees. ■ All managers perform planning and controlling act E. Decision Making ■ Most basic managerial skill is ability to make intelligent, data driven decisions. ■ Most revolved around 3 ?s: ● What should we be selling? ● Who should we be serving? ● How should we execute? ■ 12 provides exs of decisions pertaining to each category II. Why Does Managerial Accounting matter to your career? A. Need to know how to plan for the future and make progress toward achieving goals and intelligent decisions. In other words managerial accounting skills are useful in any career, organization and industry B. Business Majors ■ Exhibit 13 provides examples of how planning, controlling and decision making affect 3 majors other than accounting...marketing, supply chain management, and human resource management ■ C. Accounting Majors ■ Inst of mang accountants (IMA) estimates that more than 80% of professional accountants in the US work in non public accounting environments. ■ Public accounting most important function is to protect investors and other external parties by assuring them that companies are reporting historical results that comply with applicable accounting rules. ■ Primary role of managerial accountants is to partner w their cowerks w/in the organization to improve performance. ■ Have strong financial accounting skills, more importantly help improve organizational performance by applying planning, controlling, and decision making skills that are the foundation of manag accting. D. Professional Certification a smart investment III. Managerial Accounting: beyond the numbers A. Exhibit 15 summarizes how each ch of the book teaches measurement skills that managers use on B. An ethics perspective ■ Ethical behavior keeps economy running. Would be much less efficient so less would be available to consumers, quality would be lower, prices would be higher. Businesses too ■ Code of Conduct for Management accountants ● The institute of management accountants (IMA) of Us has adopted an ethical code called the statement of ethical professional practicethat describes in some detail the ethical respo of management accountants ● Standard consists of two parts (exhibit 16) (1) First part provides general guidelines for. Four broad areas maintain a high level of professional competence, to treat sensitive matters w confidentiality, maintain personal integrity, disclose info in a credible fashion. (2) Second part specifies what should be done if an indiv finds evidence of ethical misconduct (3) Ex ■ Consequences of not abiding: ● Managers not being trusted to distribute therefore decisions would be based on incomplete info and operations would deteriorate. ● Employees could accept bribes from suppliers ● Presidents of companies could lie in their annual reports and Fin statements, decisions would be off. Suspecting the worst, rational investors would pay less for securities issued by companies and may not be willing to invest. Companies would then have less money slower econ growth, fewer goods and serv, and higher prices. ■ Ethical behavior is also foundation for managerial accounting. (planning, controlling and decision making) C. A Strategic Management Perspective ■ Companies develop a strategy that defines how they intend to succeed in the marketplace. ■ A strategyis a “game plan” that enables a comp to attract customers by distinguishing itself from competitors. Should target customercustomer value propositions ■ Customer value proportions tend to fall in three categories ● Customer intimacy:we can customize our products and services to meet your indiv needs better than our comp, cost serv (nordys) ● Operational excellencechoose us bc we deliver products and services faster, more convenient, and at lower prices (walmart) ● Product leadershiphigher quality (apple) D. An Enterprise Risk Management Perspective ■ Enterprise risk management is a process used by a comp to identify those risks and develop responses to them that enable to be reasonably assured of meeting its goals. ■ Exhibit 17 risks may face ● The right hand column of Ex 17 provides an example of control that could be implemented to reduce each of the risk mentioned in the left hand column. Although cannot completely eliminate risk, they enable to manage them. ● Companies use controls to reduce the risk that their plans will not be achieved. (1) Risk management part of decision making ■ A Corporate Social Respon Perspective ● Companies have a corporate social responsibilto rserve other stakeholder (customers, employees, suppliers, communities and environmental and human rights advocates. ● A corp social respon (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. Extends beyond legal compliance to include voluntary actions that satisfy stakeholder exp. ● Exhibit 18 present examples of corp social respon that are of interest to six stakeholder groups. ■ A Process Management Perspective ● Most companies organize themselves by functional departments, such as marketing, Research & D Department, and accounting dep. ● “Chain of command” superior and subordinate relationships ● Managers understand that business processes serve needs of company’s most important stakeholders its customers ● A business process is a series of steps that are followed in order to carry out some task in a business. Steps often span departmental boundaries, thereby req managers to cooperate across functional departments ● The term value chaindescribes how an org functional departments interact w one another to form bus processes. A value chain, (19) consists of the major bus functions that add value to a company’s products and services. ● ● Managers freq use process management method called lean thinkin or what is calllean productionin the manufacturing sector. (1) Lean production is a management approach that organizes resources such as people and machines around the flow of bus processes and that only produces units in response to customer orders; often calljustintimproduction (orJIT)bc products are only are only manufactured in response to customer orders and completed just in time to be shipped to customers. (2) Lean thinking differs from traditional methods, which organize work departmentally and encourage departments to maximize their output even if it exceed customer demand and bloats inventories. Lean approach = minimal inventory, fewer defects, less wasted effort, and quicker customer response time than traditional ■ Intrinsic Motivation ● Comes from within ● Technical competence (spans the value chain), personal integrity (in terms of work ethic and honesty), strong communication skills (oral writing) ● Leader ■ Extrinsic Incentives ● Highlight important goals to motivate employees to achieve them ● Andy getting butt tattoo in office ■ Cognitive bias ● All people have distorted thought processes ● Anchoring bias:$180 discount too good to pass up (1) Anchor is the false assertion of production actually worth 200 ● When cog bias cannot be eliminated effective leader should take two steps (1) Acknowledge their own susceptibility to cog bias (2) Ack presence of cogn bias in others and introduce techniques to minimize their adverse consequences. IV. Appendix 1A: Corporate Governance A. Effectivecorporate governance enhances stockholder’ confidence that a company is being run in their best interest rather than in interest of top managers. B. Corp governance is a system by which a company is directed and controlled. ■ If properly implemented the corp governance system should provide incentives for the board of D and top management to pursue objectives that are in the interest of the company’s owners and should provide for effective monitoring ■ However not always monitored welled. Enron! In attempt to respond to these concerns, the US congress passed the most important reform of corp in many decadesThe SarbanesOxley Act of 2002. C. The Sarbanes Oxley Act of 2002 ■ The SarbanesOxley Act of 2002 was intended to protect the interest of publically traded companies by improving reliability and accuracy of corp FS an disclosures. ■ 6 key concept of legislation ● First, Act requires both CEO and CFO certify in writing that their FS and disclosures represent the results of operations. No misrepresentations ● Second, Act established Public Company Accounting Oversight Board to provide additional oversight over the audit profession. Board can conduct investigations, take disciplinary actions against them and enact various standards and rules concerning the prep of audit reports ● Third, the act places the power to hire, compensate, and terminate the public accounting firm that audits a company’s FS in the hands of audit committee of the Board of D. Previously, management had power to hire and fire auditors. Act specifies that all members of the audit must be independent, therefore not having affiliation w company they are overseeing. ● Fourth, act places important restrictions on audit firms. Public accounting firms earned a large part of their profits by providing consulting services to the companies that they audited. This provided appearance of lack of independence bc a client that was dissatisfied w auditor's stance might threaten the stop using them as a consulter. Act therefore prohibits a public accounting firm from providing a wide variety of non auditing services to an audit client. ● Fifth, the act requires a comp’s annual report to contaiinternal control report. (1) Report must state its management’s resp to eat and maintain adequate internal controls and must contain an assessment by management of the effectiveness of its internal control structure. ● The act establishes severe penalties (20 year in prison) for altering or destroying any documents. As many as 10 years in prison for managers who retaliate against a so called whistle blower. D. Internal Control A closer look ■ Internal Controlis a process designed to provide reasonable assurance that objectives are being achieved. ● Integral part of daily lives ● Company uses internal controls to provide reasonable assurance that its FR are reliable. Its FS may contain issues for three reasons (1) Statements may erroneously exclude some transactions (2) Improperly include some transactions (3) Include transactions that have been recorded erroneously ■ Ex 1A1 describes 7 types of IC that companies use to reduce risks. Each item in exhibit is labeled as a preventive controand/or adetective control ● A preventive control deteres desireable events from occurring (1) Requiring authorization (2) Segregation of duties; authorizing transactions, recording trans, maintaining custody of the related assets ● A detective control detect undesirable events that have already occurred. (1) Reconciliations; senior manager sign all checks above X. (2) Bank reconciliations; checking dem bank dudes you fuqed up man (3) Performance reviews actual results are reasonable when compared to relevant benchmarks.if not then they have to find root of error ● ● IC cannot guarantee that obj will be achieved. (1) May provide reasonable assurance that FS disclosures are reliable, but cannot offer guarantees bc even a well designed internal control system can break down. (2) Two or more employees may collude (3) Finally, a company’s senior leader may manipulate financial results by intentionally overriding prescribed policies and procedures Glossary