Managerial Accounting Chapter 1

Vocabulary terms and definitions covering the fundamental concepts of managerial accounting, management functions, organizational structure, ethics, and modern management trends.

Managerial Accounting

A field of accounting that provides economic and financial information for managers and other internal users across service, merchandising, and manufacturing businesses.

Planning

A management function that requires looking ahead and establishing objectives such as maximizing short-term profits, market share, and environmental commitment.

Directing

A management function involving coordinating a company's diverse activities and human resources, providing incentives to motivate employees, and implementing planned objectives.

Controlling

The process of keeping company activities on track by determining whether planned goals are achieved and deciding changes when deviations occur.

Board of directors

A group elected by shareholders to formulate operating policies for the company and select officers like the president and vice-presidents.

Chief executive officer (CEO)

The individual with overall responsibility for managing the business and accomplishing organizational objectives through delegation.

Chief financial officer (CFO)

The official responsible for all accounting and finance issues, supported by the controller and the treasurer.

Controller

An individual responsible for maintaining accounting records, maintaining internal control systems, and preparing financial statements, tax returns, and internal reports.

Treasurer

An individual who has custody of the corporation's funds and is responsible for maintaining the company's cash position.

Internal audit staff

Employees who review the reliability of financial information, ensure internal control systems safeguard assets, and investigate compliance with regulations.

Sarbanes-Oxley Act of $2002$ (SOX)

U.S. legislation enacted to prevent internal control lapses, requiring CEOs and CFOs to certify the fairness of financial statements and the adequacy of internal controls.

IMA Standards of Ethical Conduct

Codes of conduct regarding competence, confidentiality, integrity, and credibility developed by the Institute of Management Accountants.

Competence

The responsibility of management accountants to maintain professional skills, perform duties according to laws, and prepare complete, clear reports.

Confidentiality

The responsibility to refrain from disclosing or using sensitive information for unethical or illegal advantage and to inform subordinates on proper handling.

Integrity

The responsibility to avoid conflicts of interest and refrain from activities that would prejudice ethical duty performance or discredit the profession.

Credibility

The responsibility to communicate information fairly and objectively while disclosing all relevant facts that could influence a user's understanding.

Corporate Social Responsibility

A business evaluation approach that considers profitability alongside sustainable business practices regarding employees and the environment.

Value chain

All activities associated with providing a product or service, including R&D, design, acquisition of raw materials, production, sales, marketing, and delivery.

Enterprise resource planning (ERP) software systems

Centralized and integrated systems, such as SAP, used to manage major business processes including manufacturing, purchasing, and human resources.

Just-in-time (JIT) inventory methods

Also called lean production, this method involves manufacturing or purchasing goods just in time for use to lower inventory levels and costs.

Activity-based costing (ABC)

A method of allocating overhead based on each product's use of economic resources as it undergoes various activities.

Theory of constraints

A specific approach used to identify and manage constraints within the value chain in order to achieve company goals.

Lean manufacturing

A process used to manage operations efficiently by eliminating waste and concentrating on customer needs, in contrast to traditional mass-production.

Target costing

One of the five principles of lean thinking; the process of identifying the acceptable cost customers are willing to pay for a product.

Value stream

The entire flow of a product's life cycle through each stage of production, used to evaluate value-added versus waste.

Balanced scorecard

A performance-measurement approach that integrates financial and non-financial measures to evaluate all aspects of company operations.