After completing this chapter you should be able to: Explain the purpose and nature of, and the role of ethics in, managerial accounting, describe accounting concepts useful in classifying costs, define product and period costs and explain how they impact financial statements, explain how balance sheets and income statements for manufacturing and merchandising companies differ. | MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES Chapter 18 Chapter 18: Managerial Accounting Concepts and Principles PURPOSE OF MANAGERIAL ACCOUNTING C 1 Planning is the process of setting goals and making plans to achieve them. Strategic plans usually set a firm’s long-term direction by developing a road map based on opportunities such as new products, new markets, and capital investments. Medium- and short-term plans are more operational in nature. They translate the strategic plans into actions. A short-term plan often covers a one-year period that, then translated into monetary terms is knows as a budget. Control is the process of monitoring planning decisions and evaluating an organization’s activities and employees. It includes the measurement and evaluation of actions, processes, and outcomes. Feedback provided by the control system allows managers to revise their plans and take corrective actions to avoid undesirable outcomes. NATURE OF MANAGERIAL ACCOUNTING Exh. 18-2 C 1 Here we see a detailed comparison of financial accounting and managerial accounting. In addition to the focus on internal decisions, note particularly that managerial accounting information may follow a flexible format, involves frequent, timely reports, and may contain more estimates and projections than financial accounting. MANAGERIAL ACCOUNTING IN BUSINESS Customer Orientation Global Economy Lean Business Model Elimination of Waste Satisfy the Customer Positive Return Lean Business Model C 2 By meeting customer needs in an efficient manner, a lean business model provides a positive return to its owners. Today’s customers have many choices, both domestic and foreign. To be successful, a business must deliver quality products and services to customers in a cost efficient manner. Adopting the lean business model can be challenging because to foster its implementation, all systems and procedures that a company follows must be realigned. Managerial accounting has an important . | MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES Chapter 18 Chapter 18: Managerial Accounting Concepts and Principles PURPOSE OF MANAGERIAL ACCOUNTING C 1 Planning is the process of setting goals and making plans to achieve them. Strategic plans usually set a firm’s long-term direction by developing a road map based on opportunities such as new products, new markets, and capital investments. Medium- and short-term plans are more operational in nature. They translate the strategic plans into actions. A short-term plan often covers a one-year period that, then translated into monetary terms is knows as a budget. Control is the process of monitoring planning decisions and evaluating an organization’s activities and employees. It includes the measurement and evaluation of actions, processes, and outcomes. Feedback provided by the control system allows managers to revise their plans and take corrective actions to avoid undesirable outcomes. NATURE OF MANAGERIAL ACCOUNTING Exh. 18-2 C
