Managerial Accounting and the Business Environment Chapter 1.

Managerial Accounting and the Business

Environment

Chapter

1

© McGraw-Hill Ryerson Limited., 2004

1-2

Learning Objectives

1. Identify the major differences and similarities between financial and managerial accounting.

2. Understand the role of management accountants in an organization.

3. Understand the basic concepts underlying just-in-time (JIT), total quality management (TQM), process reengineering, and the theory of constraints (TOC).

After studying this chapter, you should be able to:


1-3

Learning Objectives

4. Discuss the impact of international competition on businesses and on managerial accounting.

5. Explain the importance of upholding ethical standards.

After studying this chapter, you should be able to:


1-4

Managerial Accounting and Financial Accounting

Managerial accountingprovides informationto managers of anorganization whodirect and control

its operations.

Financial accountingprovides information

to stockholders,creditors, and others

who are outsidethe organization.


1-5

Work of Management

Planning

Controlling

Directing and Motivating


1-6

Planning and Control Cycle

DecisionMaking

Formulating long- andshort-term plans

(Planning)

Measuringperformance (Controlling)

Implementing plans (Directing and

Motivating)

Comparing actual toplanned performance

(Controlling)

Begin


1-7

Comparison of Financial and Managerial Accounting

Financial ManagerialAccounting Accounting

1. Users External persons who Managers who plan formake financial decisions and control an organization

2. Time focus Historical perspective Future emphasis

3. Emphasis Objectivity and Relevance Verifiability for planning and control

4. Importance Precision of information Timeliness of information

5. Subject focus Summarized data for Detailed segment reportsthe whole organization of an organization

6. Requirements Must follow GAAP Need not follow GAAPand required for and no mandatory useexternal reports


1-8

Expanding Role of Managerial Accounting

Increasing complexity andsize of organizations

Rapid development andimplementation of technology

Regulatoryenvironment

World-widecompetition

Increasedemphasison quality

Factors thatincrease the need for

managerial accountinginformation


1-9

Corporate Organization Chart

Purcha sing Personnel V ice PresidentO pera tions

T rea surer C ontro ller

C hief F ina ncia lO fficer

President

B oa rd of D irectors

Organizational Structure

An organization is a group of peopleunited for a common purpose.

An organization is a group of peopleunited for a common purpose.


1-10

Decentralization

Decentralizatio

n

decision–making

Decentralization

decision–making

Decentralization is the delegation of decision-making authority throughout an organization.

Decentralization is the delegation of decision-making authority throughout an organization.

Corporate Organization Chart

Purcha sing Personnel V ice PresidentO pera tions

T rea surer C ontro ller

C hief F ina ncia lO fficer

President

B oa rd of D irectors


1-11

Line and Staff Relationships

Line positions are directly involved in achievement of the basic objectives of an organization.Example: Production

supervisors in a manufacturing plant.

Staff positions support and assist line positions.Example: Cost

accountants in the manufacturing plant.


1-12

The Controller

The chief accountant in an organization with responsibility for:Financial planning and analysis.Cost control. Financial reporting.Accounting information systems.

The chief accountant in an organization with responsibility for:Financial planning and analysis.Cost control. Financial reporting.Accounting information systems.


1-13

The Professional Management Accountant

Three types of professional accountants work as management accountants in Canada:CGA.CA. CMA.

Three types of professional accountants work as management accountants in Canada:CGA.CA. CMA.


1-14

The Changing Business Environment

A more competitive environment emphasizing:

Higher quality products

Lower prices and costs

Global competition

Meeting and anticipating customer needs

Business environment changes in the past

twenty years


1-15

The Changing Business Environment

Just-In-Time

Total Quality Management

Process Reengineering

Theory of Constraints

New tools for managers!


1-16

Complete productsjust in time to

ship to customers.

Complete partsjust in time for

assembly into products.

Receive materialsjust in time for

production.

Scheduleproduction.

Just-in-Time (JIT) Systems

Receivecustomer

orders.


1-17

Flexibleworkforce

Flexibleworkforce

Reducedsetup time

Reducedsetup time

Zero productiondefects

Zero productiondefects

Key Elements for a SuccessfulJIT System

Improvedplant layout

Improvedplant layout

JIT purchasingFewer, but more ultra-reliable suppliers.

Frequent JIT deliveries in small lots.Defect-free supplier deliveries.

JIT purchasingFewer, but more ultra-reliable suppliers.

Frequent JIT deliveries in small lots.Defect-free supplier deliveries.


1-18

More rapidresponse to

customer orders

More rapidresponse to

customer ordersLess warehouse

space needed

Less warehousespace needed

Reducedinventory

costs

Reducedinventory

costs

Greatercustomer

satisfaction

Greatercustomer

satisfaction

Higher qualityproducts

Benefits of a JIT System


1-19

Do we need to change the plan?

Where are we?

Where do we want to go?

How do we start?

How are we doing?

Check

Plan

Act Dois

Total Quality Management

Benchmarking

ContinuousImprovement


1-20


The process isredesigned to include

only those steps that addvalue to the product.

Every step inthe businessprocess mustbe justified.

A business processis diagrammed

in detail.


1-21


Anticipated results: Process is simplified. Process is completed in less time. Costs are reduced. Opportunities for errors are reduced.

The process isredesigned to include

only those steps that makethe product more valuable.

Every step inthe businessprocess mustbe justified.

A business processis diagrammed

in detail.


1-22

Theory of Constraints

A sequential process of identifying and removing constraints in a system.

Restrictions or barriers that impedeprogress toward an objective


1-23

International Competition

Meeting world-class competition demands a world-class management accounting system.

Managers must make decisions to plan, direct, and control a world-class organization.


1-24

Professional Ethics in Accounting

Ethical accounting practices build trust and promote loyal, productive relationships with users of accounting information.

Many companies and professional organizations, such as the International Federation of Accountants (IFAC),have written codes of ethics thatserve as guides.


1-25

IFAC Code of Ethics for Professional Accountants

Competence

Confidentiality

Integrity

Objectivity

Competence

Confidentiality

Integrity

Objectivity


1-26

End of Chapter 1

Managerial Accounting and the Business Environment Chapter 1.

Documents

Transcript of Managerial Accounting and the Business Environment Chapter 1.