Managerial Accounting: An Introduction

Summary

This video introduces Managerial Accounting, emphasizing its distinction from Financial Accounting by focusing on internal users like managers and business owners. It covers the core functions of managerial accounting—planning, directing, and controlling operations—and explores key business concepts such as ERP, JIT, TQM, Lean Manufacturing, and ISO 9001. The video highlights the evolving role of management accountants in response to technological advancements and the increasing need for flexibility in businesses. It also discusses the ethical standards and professional certifications, such as the CMA, offered by the Institute of Management Accountants (IMA).

Takeaways

• 😀 Managerial Accounting focuses on providing information for internal users like business owners and managers, unlike Financial Accounting, which is geared towards external users.
• 😀 Managerial Accounting does not follow any standardized guidelines like GAAP and is more flexible when supporting decision-making.
• 😀 The main functions of Managerial Accounting include planning, directing, and controlling operations to support management decision-making.
• 😀 Planning involves setting goals and objectives, and Managerial Accounting aids this process through budgeting and forecasting.
• 😀 Directing involves overseeing daily operations, and Managerial Accounting helps with scheduling and reporting to monitor performance.
• 😀 Controlling refers to comparing actual results with planned results to identify variances, and Managerial Accounting plays a crucial role in this process.
• 😀 Technological advancements, including ERP, JIT, TQM, and Lean Manufacturing, are central to modern Managerial Accounting and help improve operational efficiencies and profitability.
• 😀 ERP (Enterprise Resource Planning) is a system that integrates various business functions for better decision-making.
• 😀 JIT (Just In Time) reduces inventory holding costs by ensuring inventory is purchased and delivered only when needed.
• 😀 Managerial accountants' roles are expanding, requiring skills in financial and managerial accounting, business knowledge, communication, and teamwork.
• 😀 The Institute of Management Accountants (IMA) is the largest professional body for management accountants, offering certification through the CMA exam and a code of ethics that includes competence, confidentiality, integrity, and credibility.

Q & A

What is the primary difference between Managerial Accounting and Financial Accounting?

Managerial Accounting focuses on internal users such as business owners and managers, while Financial Accounting is intended for external users, providing standardized financial reports like balance sheets and income statements.

What are the main functions of Managerial Accounting?

The main functions of Managerial Accounting are planning, directing, and controlling operations. These functions help support management decision-making by using tools such as budgeting, forecasting, performance monitoring, and variance analysis.

How does Managerial Accounting support the planning function in management?

Managerial Accounting supports planning by providing tools like budgeting and forecasting, which help set goals, objectives, and strategies for achieving them.

What is the role of Management by Wandering Around (MBWA) in Managerial Accounting?

MBWA is an approach where managers oversee day-to-day operations by interacting directly with employees. While effective, it can sometimes lead to micromanagement. Managerial Accounting aids this function by providing scheduling and performance reporting tools.

How does Managerial Accounting help in the controlling function of management?

Managerial Accounting aids in controlling by comparing actual performance to planned outcomes, identifying variances, and providing insights into where operations can be adjusted to meet goals.

What technological tools have influenced the role of Managerial Accounting?

Technological tools like ERP (Enterprise Resource Planning), JIT (Just in Time), TQM (Total Quality Management), Lean Manufacturing, and ISO 9001 have helped improve decision-making, operational efficiency, and profitability in businesses, all of which are supported by Managerial Accounting.

What skills are required for modern management accountants due to technological advancements?

Modern management accountants need strong knowledge of financial and managerial accounting, analytical skills, business acumen, collaboration abilities, and effective communication skills.

What is the role of the Institute of Management Accountants (IMA)?

The IMA is the largest professional organization for management accountants, providing resources, certification (CMA), and a code of ethics to guide professional conduct.

What is the CMA certification, and who is eligible to take the exam?

The CMA (Certified Management Accountant) certification is a professional qualification for management accountants. To be eligible, one must have a four-year degree and pass the CMA exam, which tests expertise in financial and managerial accounting.

What are the key ethical principles outlined by the IMA for management accountants?

The IMA's key ethical principles include competence, confidentiality, integrity, and credibility. These principles guide management accountants in maintaining professional standards and ethical conduct in their work.