Presentation on theme: "Managerial Accounting & the Business Environment"— Presentation transcript:
1 Managerial Accounting & the Business Environment Chapter 1Managerial Accounting & the Business Environment
2 Managerial Accounting and Financial Accounting Managerial accounting provides information for managers inside an organization who direct and control its operations.Financial accounting provides information to stockholders, creditors and others who are outside the organization.
3 Directing and Motivating Work of ManagementPlanningDirecting and MotivatingControlling
4 Planning and Control Cycle Exh.1-1Planning and Control CycleFormulating long-and short-term plans (Planning)BeginComparing actual to planned performance (Controlling)Implementing plans (Directing and Motivating)Decision MakingMeasuring performance (Controlling)
5 Differences Between Financial and Managerial Accounting
6 Organizational Structure Decentralization is the delegation of decision-making authority throughout an organization.
7 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.
8 The Changing Business Environment Growth of the internetJust-in-Time productionTotal Quality ManagementInternational competitionBusiness environment changes in the past twenty years
9 The Changing Business Environment New tools for managers!Just-In-TimeTotal Quality ManagementProcess ReengineeringTheory of Constraints
10 Just-in-Time (JIT) Systems Receive customer orders.Complete products just in time to ship customers.Schedule production.Receive materials just in time for production.Complete parts just in time for assembly into products.
11 JIT Consequences JIT purchasing Zero production defectsImproved plant layoutReduced setup timeFlexible workforceJIT purchasingFewer, but more ultrareliable suppliers.Frequent JIT deliveries in small lots.Defect-free supplier deliveries.
12 Benefits of a JIT System Reduced inventory costsFreed-up fundsGreater customer satisfactionHigher quality productsMore rapid response to customer ordersIncreased throughput
13 Total Quality Management BenchmarkingWhere are we?Where do we want to go?PlanDo we need to change the plan?How do we start?ActDoisContinuous ImprovementCheckHow are we doing?
14 Process Reengineering Anticipated results:Process is simplified.Process is completed in less time.Costs are reduced.Opportunities for errors are reduced.A business process is diagrammed in detail.Every step in the business process must be justified.The process is redesigned to include only those steps that make our product more valuable.
15 Restrictions or barriers that impede progress toward an objective Theory of ConstraintsA sequential process of identifying and removing constraints in a system.Restrictions or barriers that impede progress toward an objective
16 Theory of Constraints 2. Identify process constraints Only actions that strengthen the weakest link in the “chain” improve the process.2. Identify process constraints1. Measure process capacity3. Use bottlenecks effectively.4. Coordinate processes
17 Theory of Constraints Process Capacity A measure of a process’s ability to transform resources into value products and services.System ConstraintThe point in a system that limits the overall output of the system. Often called the “bottleneck.”
18 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.
19 E-CommerceDuring 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)
20 Importance of 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 Institute of Management Accountants (IMA), have written codes of ethics which serve as guides for employees.Code of Conduct for Management Accountants
21 IMA Code of Ethics for Management Accountants Four broad areas of responsibility:Maintain a high level of professional competencetreat sensitive matters with confidentialityMaintain personal integrityBe objective in all disclosures
22 IMA Code of Ethics for Management Accountants Follow applicable laws, regulations and standards.Maintain professional competence.CompetencePrepare complete and clear reports after appropriate analysis.
23 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.ConfidentialityEnsure that subordinates do not disclose confidential information.
24 IMA Code of Ethics for Management Accountants Avoid conflicts of interest and advise others of potential conflicts.Do not subvert organization’s legitimate objectives.IntegrityRecognize and communicate personal and professional limitations.
25 IMA Code of Ethics for Management Accountants Avoid activities that could affect your ability to perform duties.Communicate unfavorable as well as favorable information.Refrain from activities that could discredit the profession.Refuse gifts or favors that might influence behavior.Integrity
26 IMA Code of Ethics for Management Accountants Communicate information fairly and objectively.ObjectivityDisclose all information that might be useful to management.
27 IMA Code of Ethics for Management Accountants Resolution of Ethical ConflictFollow 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.
28 IMA Code of Ethics for Management Accountants Resolution of Ethical ConflictClarify issues in a confidential discussion with an objective advisor.Consult an attorney as to legal obligations.The last resort is to resign.