Managerial%20Accounting%20

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Managerial Accounting the Business Environment
Chapter 1
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Managerial Accounting and Financial Accounting
Managerial accountingprovides informationfor
managers inside anorganization whodirect and
controlits operations.
Financial accountingprovides informationto
stockholders,creditors and otherswho are
outsidethe organization.
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Work of Management
Planning

Directing and Motivating
Controlling
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Planning and Control Cycle
Exh. 1-1
Formulating long-and short-term plans (Planning)
Begin
Comparing actualto planned performance
(Controlling)
Implementing plans (Directing and Motivating)
DecisionMaking
Measuringperformance (Controlling)
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Differences Between Financial and Managerial
Accounting
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Organizational Structure
Decentralization is the delegation of
decision-making authority throughout an
organization.
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Line and Staff Relationships

• Line position are directly related to
  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.

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The Changing Business Environment

• Growth of the internet
• Just-in-Time production
• Total Quality Management
• International competition

Business environment changes in the past twenty
years
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The Changing Business Environment
Just-In-Time Total Quality Management Process
Reengineering Theory of Constraints
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Just-in-Time (JIT) Systems
Receivecustomerorders.
Complete productsjust in time toship customers.
Scheduleproduction.
Complete partsjust in time forassembly into
products.
Receive materialsjust in time forproduction.
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JIT Consequences
Zero productiondefects
Improvedplant layout
Flexibleworkforce
Reducedsetup time
JIT purchasing Fewer, but more ultrareliable
suppliers. Frequent JIT deliveries in small
lots. Defect-free supplier deliveries.
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Benefits of a JIT System
Reducedinventorycosts
Freed-up funds
Greatercustomersatisfaction
More rapidresponse tocustomer orders
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Total Quality Management
Where are we? Where do we want to go?
Plan
Do we need to change the plan?
How do we start?
Act
Do
is
Check
How are we doing?
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Process Reengineering

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

A business processis diagrammedin detail.
The process isredesigned to includeonly those
steps that makeour product more valuable.
Every step inthe businessprocess mustbe
justified.
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Theory of Constraints

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

Restrictions or barriers that impedeprogress
toward an objective
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Theory of Constraints
Only actions that strengthen the weakest link in
the chain improve the process.
2. Identify process constraints
1. Measure process capacity
3. Use bottlenecks effectively.
4. Coordinate processes
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Theory of Constraints
System Constraint
The point in a system that limits the overall
output of the system. Often called the
bottleneck.
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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.

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E-Commerce

• During 2001, many dot.com businesses failed that
  might have benefited from the application of
  managerial accounting tools
• cost concepts (Chap. 2)
• cost estimation (Chap. 5)
• cost-volume-profit (Chap. 6)
• activity-based costing (Chap. 8)
• budgeting (Chap. 9)
• decision-making (Chap. 13)
• capital budgeting (Chap. 14)

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Importance of Ethicsin Accounting

• Ethical accounting practices build trust and
  promote loyal, productive relationships with
  users of accounting information.
• Many companies and professional organizations,
  such as the Instituteof Management Accountants
  (IMA),have written codes of ethics whichserve
  as guides for employees.
• Code of Conduct for Management Accountants

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IMA Code of Ethics for Management Accountants

• Four broad areas of responsibility
• Maintain a high level of professional competence
• treat sensitive matters with confidentiality
• Maintain personal integrity
• Be objective in all disclosures

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IMA Code of Ethics for Management Accountants
Follow applicable laws, regulations and
standards.
Maintain professional competence.
Competence
Prepare complete and clear reports after
appropriate analysis.
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IMA Code of Ethics for Management Accountants
Do not disclose confidential information unless
legally obligated to do so.
Do not use confidential information for personal
advantage.
Confidentiality
Ensure that subordinates do not disclose
confidential information.
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IMA Code of Ethics for Management Accountants
Avoid conflicts of interest and advise others of
potential conflicts.
Do not subvert organizations legitimate
objectives.
Integrity
Recognize and communicate personal and
professional limitations.
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IMA Code of Ethics for Management Accountants
Integrity
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IMA Code of Ethics for Management Accountants
Communicate information fairly and objectively.
Objectivity
Disclose all information that might be useful to
management.
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IMA Code of Ethics for Management Accountants

• Resolution of Ethical Conflict
• Follow established policies.
• For unresolved ethical conflicts
• Discuss the conflict with immediate superior.
• If immediate superior is the CEO, consider the
  board of directors or the audit committee.
• Except where legally prescribed, maintain
  confidentiality.

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IMA Code of Ethics for Management Accountants

• Resolution of Ethical Conflict
• Clarify issues in a confidential discussion
  withan objective advisor.
• Consult an attorney as to legal obligations.
• The last resort is to resign.

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End of Chapter 1