PACE Academic IG

Introduction

Many students become accounting majors because they want to work in public accounting.  It should not come as a surprise that students may not be hired by public accounting firms, and if they are hired, they may not be employed for a long period of time.  Working in private industry is not a consolation prize.  Working in private industry is a great opportunity for an accounting major.  One way for an accounting major to prepare for a career in private industry is to get the most from managerial accounting.

Organization

I divide my presentation of managerial accounting topics into 3 areas:

1.     Cost Accounting        

2.     FP&A

3.     Decision-Making

Cost Accounting

I tell my students that cost accounting is the parent of managerial accounting.  That is because the Institute of Management Accountants (IMA) was originally called the National Association of Cost Accountants (NACA).  The presence of cost accounting may not appeal to accounting majors who wish to be hired by public accounting firms, but cost accounting is an excellent way to understand how a company works from the inside.  Helping students understand how a company works from the inside prepares them for what many of them will face in their futures, employment in private industry.  Here is how I frame my presentation of cost accounting topics when teaching managerial accounting.

When teaching job-order costing, I remind students that the use of this system is most appropriate when companies manufacture products that require a high degree of customization.  As a result, I frame job-order costing as a system that describes what companies create for whom.  That allows students to see more about products in terms of their characteristics – durability, flexibility, innovation, etc. – and how companies can improve their relationships with customers, employees, and suppliers.  This provides accounting majors with a better understanding of topics in economics like differentiation as well as what management courses are, a study of effort, and what marketing courses are, a study of persuasion.  I have found that this approach helps accounting majors acquire a broader, deeper knowledge of business courses that will prepare them for professional advancement.

When teaching process costing, I remind students that the use of this system is most appropriate when companies manufacture products that require little to no degree of customization.  As a result, I frame process costing as a system that describes how companies create what they sell.  This allows me to help accounting majors prepare for management careers by focusing on how things are done.  By knowing how things are done, accounting majors are ready to offer suggestions for improvements that lead to wins for the student, the company, and the company’s stakeholders.  The wins that are created can only happen when accounting majors successfully apply what they learned from the classroom, which is very important for me as an accounting professor.

FP&A

I define FP&A as a system of thinking and learning about wealth.  I define wealth as the abundance of valuable possessions.  For the accounting major, its important in private industry to know what a company possesses, whether it is valuable, and how much does the company have.  This provides accounting majors with a framework to incorporate their education in data analytics and combine it with managerial accounting.  The combination is an excellent way for accounting majors to prepare for a future in private industry.

When teaching master budgeting, I begin with my definition of a budget: A budget expresses thoughts with numbers.  Numbers can be financial like sales prices, unit costs, net income, cash, and total assets.  Also, numbers can be non-financial like the number of units sold, the number of units produced, and the number of hours worked.  Putting an emphasis on non-financial numbers in the classroom helps accounting students work with production and selling management who rely on non-financial numbers in their daily activities.  The emphasis prepares accounting majors for opportunities in private industry that may not be considered as students but become quite rewarding as professionals.

When teaching flexible budgeting, I put the emphasis on analysis.  Analysis is about taking the whole and breaking it down into parts, and I do that by focusing on variances due to volume and variances due to price and/or cost.  The breakdown into volume variances helps accounting majors learn more about the connection between managerial accounting and marketing, a connection that is most valuable for an accountant in private industry.  The breakdown into price and cost variances helps accounting majors learn more about the connection between managerial accounting and stakeholder relationships.  I am finding that flexible budgeting is helping students bring a fresh perspective to the job in ways that will provide great opportunities in private industry.

Decision-Making

The last chapter I teach in a semester in which I am teaching managerial accounting is differential analysis.  Differential analysis is a great way to finish managerial accounting because it addresses the most important element of the course, how to help management make more appropriate decisions.  My approach is to begin with the basics of differences in revenues and expenses based on what currently exists versus a “what-if” question.  I continue by reminding students  about what is relevant versus irrelevant financially by discussing opportunity costs and sunk costs.  I then turn to various questions that a company’s management may ask like

· Should a company accept or reject a special order?

· Should a company continue to make a part or buy it from a supplier?

· Should a company continue processing a product or sell it as is?

· Should a company keep an existing division or discontinue operations?

· Should a company keep an existing customer relationship or end it?

I enjoy discussing the last point with students because it is something that I did when employed in private industry.  The experience allowed me to learn more about the operations of my employer and the effort that went into customer relationships.  The experience also allowed me to take my learning on the job and apply it to what I learned in the classroom about income statements.  Most importantly, the experience allowed me to identify what at the time was an unprofitable customer relationship that was unprofitable because of a billing error.  The error was because an item in the contract was not billed, and when it was, it turned the relationship from unprofitable to profitable.

Helping management make more appropriate decisions!

Conclusion

We lack certainty in what our futures are, but we can prepare to the best of our knowledge.  As an accounting professor, I dedicate myself to help my students prepare for a better future.  I do that by building a foundation in course topics that connect the classroom to the job.  For accounting majors, public accounting is not the only career choice.  A career in private industry is a great career choice for accounting majors, and a great career in private industry can happen for an accounting major when they get the most from managerial accounting.