ACCT 2302

Fundamentals of Accounting II

Spring 2011

Lecture 1

Professor Jeff Yu

Welcome to ACCT 2302 !

• Did you get the email?

• Get the syllabus?

• Get the textbook?

• Browse the class website?

• Bring your name tag?

Topics for Today

• Who am I?

• What are the class requirements? (website; syllabus)

• What is this course about?

• A brief introduction to managerial accounting

Introduction

About me: • Born in China

• “Over-educated” (BA, MA, PhD)

• Was a professor at MIT Sloan School before joining SMU in 2008

• Taught both financial and managerial accounting to students from MIT, Harvard, Wellesley college & The Ohio State University

• Research interest The use of accounting information in financial contracts How accounting information affects investment

• Married with one child

About you?

What to expect from me?Together, we can make learning fun & effective!

I am committed to helping you……

Office: 334 FincherPhone : 214 768 8321Email: jieweiyu@smu.edu

Come to my office hours: MW 10:50-11:50 amCall me to make appointment for office visit.Only Yes/No type questions over email, please.Additional office hours by my TA.

What do I expect from you? Attend the class.

• Attendance is required. You should sit in the appropriate seat and display a legible name tag at all times. Do not arrive late or leave early.

Participate in class discussion.

Minimize disruptions. All cell phones should be turned off during class.

Focus on the class.

Respect. You should act respectfully toward all class participants.

Be prepared for class. Read assigned chapters and attempt practice problems. Persistence and determination to learn.

• This course is very time-demanding, so be prepared to work hard and devote time out of the class to frequent reviews and practices.

• You are only going to get out of this course what you put into it.

What you will need for the class?

Textbook:• Garrison, Noreen & Brewer: Managerial Accounting, 13th Edition,

McGraw-Hill Irwin, 2010

Class Website (important!) http://jyu.cox.smu.edu/acct2302/

• Updated class schedule

• Lecture notes (please print them out and bring to the class)

• Solutions to Quizzes and Exams

• Link to Blackboard to check grades, etc.

• Syllabus (read it very carefully!)

Course Overview - Objective

Have a basic understanding of managerial accounting:

• Become familiar with what accounting information is typically used within the firm.

• Develop an understanding of how accounting information is used by managers in the decision making process.

• Consider how accounting information can be used to motivate members of the firm or as a mechanism to control their behavior.

Course Overview – Organizing Structure

Managerial accounting is concerned with the use of internal accounting system for planning, decision-making & control purposes. Accordingly:

• We first discuss how costs behave and how internal accounting system determine and allocate costs (lectures 2-11)

• We then talk about how to use the accounting information in profit planning (lectures 12-13), management control (lectures 15-19) and decision making (lectures 20-24).

Course Overview - Themes

Throughout the course we will develop an understanding of three basic concepts:

1. How costs behave?

2. How accounting systems report costs?

3. How to disentangle “economic” costs from reported “accounting” costs?

These building blocks will be used to gain insights on the role of accounting information in a variety of settings.

Introduction to managerial accounting

Why does Warren Buffet need accounting information?

External needs • Annual report – shareholders, lenders, regulators, suppliers, customers.

Internal needs • Check whether Dairy Queen was profitable • Know how much it costs to provide car insurance so know how much to

charge various people for various policies • Know the cost of CEO compensation – figure out an incentive plan

Information that is provided by a managerial accounting system - this is what we are going to learn about this semester.

Managerial vs. Financial Accounting

Accounting System

(accumulates financial and(accumulates financial and

managerial accounting data)managerial accounting data)

Managerial Accounting

Information for decisionInformation for decision

making and controlmaking and control

of an organization’sof an organization’s

operationsoperations

Financial Accounting

Published financialPublished financial

statements and otherstatements and other

financial reportsfinancial reports

Internal

UsersExternal

Users

Managerial vs. Financial Accounting

Quick Check

Which of the following statement is True:A) Managerial Accounting provides report primarily for

bondholders and shareholders.

B) Financial Accounting has a future perspective.

C) Managerial Accounting emphasize on relevance rather than verifiability.

D) Managerial Accounting must follow GAAP.

What do managers do?

DECISION MAKING:

Planning • Managers plan how to reach objectives

Directing and motivating• Motivate people to carry out plans and run operations

Controlling • Managers control processes so that objectives will conform to

plans

MA provides info to help decision making

Planning

Directing & Motivating

Controlling (Measuring

Performance)

Evaluating Performance

vs. PlansDecision Making

Who should take this course

• Are you going to be a manager?

• Are you going to be a consultant?

• Are you going to be an entrepreneur?

• Are you going to work for a company?

Summary

• This course aims to helping you become a sophisticated user of accounting information.

• You need to understand how it is produced as well as how it could be used to make informed operational and strategic decisions.

• Accounting is extremely important for non-accountants as well.

• “To be good at your business, you have to know the numbers – cold.”

------- Harold Geneen, former chairman of IT&T

Importance of Ethics

Corporate Governance reform

– Sarbanes Oxley Act of 2002

Clarifies management’s responsibilities

CEO and CFO must certify fairness of financial statements and adequacy of internal control

Board of Directors, especially the Audit Committee, must meet certain criteria

Penalties for misconduct are substantially increased

Codes of Ethics are now required

Surviving tips for this class

Get off to a fast start. • The end of the semester is hectic. • It is difficult to catch up once you fall behind.

Always come to class with some understanding of the topic assigned.

Ask questions and more questions.

Work problems and more problems.

For Next Monday

Get textbook Get familiar with the class website Read Chapter 2 Attempt the assigned practice problems Bring completed information sheet to the class Bring a name tag to the class