The chapter introduces managerial accounting along with the fundamental principle of the text, which

is the importance of using managerial accounting data in decision making. Students are introduced to

the importance of such data in decision making by discussing the primary responsibilities of a

manager: planning, directing, and controlling. To help students understand the importance of

managerial accounting, financial and managerial accounting are contrasted and compared. Managerial

accounting has internal users relying on relevant information prepared specifically for management’s

needs, whereas financial accounting has external users using reliable and objective information in the

form of financial statements.

The role of managerial accounting is illustrated by comparing the perception and reality of accounting

and through the presentation of a typical organizational structure, as well as the roles and skills

required of management accountants. In addition to their traditional roles, management accountants

also play an important role in planning, analyzing, and interpreting accounting data and providing

decision support. Management accountants are often referred to as business advisors, analysts, and

finance professionals. To fulfill these roles, management accountants today must possess both

technical and nontechnical competencies, such as solid knowledge of both financial and managerial

accounting, analytical skills, knowledge of how a business functions, ability to work on a team, and

oral and written communication skills. Management accountants are trusted and valued business

advisors. Managerial accounting knowledge is important to all types of careers, including sales

professionals and musicians. The Institute of Management Accountants (IMA) is the professional

association for management accountants, which also develops standards of ethics and standards of

professional conduct. It provides a forum for research, practice development, education, knowledge

sharing, and advocacy of the highest ethical and best practices in management accounting and finance.

The Certified Management Accountant (CMA) certification, which reinforces the technical skills

required for management accountants, is issued by the IMA and requires professionals to pass a

rigorous two-part exam, gain two years of relevant professional experience, and maintain continuing

professional education. The IMA has also developed principles and standards to help management

accountants deal with ethical challenges.

The Decision Guidelines and Summary Problems are useful examples of questions and outlines that

help students summarize their learning and reinforce the objectives of the chapter. Two sets of

Decision Guidelines and Summary Problems are present in this chapter. The first set of Guidelines

reinforces the role of managerial accounting and the management accountant in an organization. The

first set of Summary Problems reinforces the concepts introduced in the first part of the chapter. Topics

include management’s responsibilities, managerial versus financial accounting, and ethical

responsibilities.

The next section of the chapter presents the implications of business trends on management

accounting. Business trends discussed include enterprise resource planning, critical thinking,

implications of a knowledge economy, sustainability, social responsibility, and the triple bottom line.

The section ends with a discussion of the Sarbanes-Oxley Act of 2002.