Managerial Accounting: Cost, Trends, and Financial Statements

This presentation provides a comprehensive overview of managerial accounting, beginning with its fundamental features and contrasting it with financial accounting. It details the functions of management, including planning, directing, and controlling, and illustrates the organizational structure within a company. The presentation then delves into key cost concepts, such as direct materials, direct labor, and manufacturing overhead, distinguishing between product and period costs. It demonstrates how to compute the cost of goods manufactured and prepare essential financial statements for manufacturers, including the income statement, cost of goods sold section, and balance sheet. Furthermore, it explores current trends in managerial accounting, like the value chain, just-in-time inventory, total quality management, activity-based costing, and the balanced scorecard, along with discussions on business ethics and corporate social responsibility. This presentation offers valuable insights into managerial accounting principles and practices.

Managerial Accounting
Eighth Edition
Weygandt ● Kimmel ● Kieso
Chapter 1
Managerial Accounting
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Chapter Outline
Learning Objectives
LO 1 Identify the features of managerial accounting and
the functions of management.
LO 2 Describe the classes of manufacturing costs and the
differences between product and period costs.
LO 3 Demonstrate how to compute cost of goods
manufactured and prepare financial statements for a
manufacturer.
LO 4 Discuss trends in managerial accounting.
2Copyright ©2018 John Wiley & Sons, Inc.

Managerial Accounting Basics
LEARNING OBJECTIVE 1
Identify the features of managerial accounting and the
functions of management.
Provides economic and financial information for
managers and other internal users.
Comparing Managerial and Financial Accounting
Similarities and differences:
• Each field deals with economic events of a business
• Both require that economic events be quantified and
communicated to interested parties
LO 1 3Copyright ©2018 John Wiley & Sons, Inc.

Comparing Managerial and Financial
Feature Financial Accounting Managerial Accounting
Primary Users
of Reports
External users: stockholders,
creditors, and regulators.
Internal users: officers and
managers.
Types and Frequency
of Reports
Financial statements.
Quarterly and annually.
Internal reports.
As frequently as needed.
Purpose of Reports General-purpose. Special-purpose for
specific decisions.
Content of Reports
Pertains to business as a whole.
Highly aggregated (condensed).
Limited to double-entry accounting
and cost data. Generally accepted
accounting principles.
Pertains to subunits of the
business. Very detailed.
Extends beyond double-entry
accounting to any relevant
data. Evaluated based on
relevance to decisions.
Verification Process Audited by CPA. No independent audits.
LO 1 4Copyright ©2018 John Wiley & Sons, Inc.

Management Functions
Planning
• Maximize
short-term
profit and
market share
• Commit to
environmental
protection and
social
programs
• Add value to
the business
Directing
• Coordinate diverse
activities and human
resources
• Implement planned
objectives
• Provide incentives to
motivate employees
• Hire and train
employees
• Produce a smooth-
running operation
Controlling
• Keeping activities
on track
• Determine whether
goals are met
• Decide changes
needed to get back
on track
• May use an informal
or formal system of
evaluations
LO 1 5Copyright ©2018 John Wiley & Sons, Inc.

Organizational Structure
Organization charts show the interrelationships of activities and the delegation of
authority and responsibility within the company.
LO 1 6Copyright ©2018 John Wiley & Sons, Inc.

Do It! 1: Managerial Accounting
Indicate whether the following statements are true or false.
1. Managerial accountants have a single role within
an organization: collecting and reporting costs to
management.
False
2. Financial accounting reports are general-purpose
and intended for external users. True
3. Managerial accounting reports are special-purpose
and issued as frequently as needed. True
LO 1 7Copyright ©2018 John Wiley & Sons, Inc.

Do It! 1: Managerial Accounting
(Continued)
Indicate whether the following statements are true or false.
4. Managers’ activities and responsibilities can be
classified into three broad functions: cost
accounting, budgeting, and internal control.
False
5. Managerial accounting reports must now
comply with generally accepted accounting
principles (GAAP).
False
LO 1 8Copyright ©2018 John Wiley & Sons, Inc.

Managerial Cost Concepts
LEARNING OBJECTIVE 2
Describe the classes of manufacturing costs and the
differences between product and period costs.
Managers should ask questions such as the following.
1. What costs are involved in making a product or
providing a service?
2. If we decrease production volume, will costs decrease?
3. What impact will automation have on total costs?
4. How can we best control costs?
LO 2 9Copyright ©2018 John Wiley & Sons, Inc.

Manufacturing Costs
Activities and processes that convert raw materials into
finished goods.
LO 2 10Copyright ©2018 John Wiley & Sons, Inc.

Manufacturing Costs
Direct Materials
• Raw materials are basic materials
and parts used in manufacturing
process
• Raw materials that can be
physically and directly associated
with finished are direct materials
LO 2 11Copyright ©2018 John Wiley & Sons, Inc.

Manufacturing Costs
Indirect Materials
Have one of two characteristics
1. Not physically part of finished product
2. Are impractical to trace to finished product because
their association with finished product is too small in
terms of cost
Considered part of manufacturing overhead
LO 2 12Copyright ©2018 John Wiley & Sons, Inc.