Copyright © 2003 Pearson Education Canada Inc. Slide 1-1 Chapter 1 The Accountant’s Role in the Organization
Copyright © 2003 Pearson Education Canada Inc. Slide 1-2 Management Accounting Management accounting measures and reports financial and non-financial information that helps managers make decisions to fulfill the goals of an organization Managers use management accounting information to choose, communicate and implement strategy coordinate product design, production and marketing decisions Management accounting focuses on internal reporting Management accounting is future oriented Pages 2-3
Copyright © 2003 Pearson Education Canada Inc. Slide 1-3 Financial Accounting Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP) Managers are responsible for the financial statements issued to investors, government regulators, and other parties outside the organization Financial accounting focuses on external parties Financial accounting reports on what happened in the past Pages 2-3
Copyright © 2003 Pearson Education Canada Inc. Slide 1-4 Cost Accounting and Cost Management Cost accounting measures and reports information relating to the cost of acquiring and utilizing resources Cost accounting provides information for management and financial accounting Cost management describes the approaches and activities of managers in short-run and long-run planning and control decisions These decisions increase value of customers and lower costs of products and services Cost management is an integral part of a company’s strategy Pages 3-4
Copyright © 2003 Pearson Education Canada Inc. Slide 1-5 Management Accountants and Strategy Strategy specifies how an organization matches its own capabilities with opportunities in the marketplace to accomplish its objectives Strategy examples Quality products or services at low prices (WestJet) Unique products or services at higher prices (Clublink) Management accountants provide information to management such as Who are our customers and suppliers Sensitivity of market to price, quality and service Industry characteristics (size, growth) Pages 4-6
Copyright © 2003 Pearson Education Canada Inc. Slide 1-6 Planning and Control Management DecisionsAccounting System Pages 6-8 PLANNING increase advertising rates Budgets pages sold, rates per page, revenue CONTROL Action implement rate increase Accounting System invoices / receipts recorded in ledger Performance Evaluation comparison of actual and budgeted revenues Performance Reports pages sold, rate per page, revenue Feedback Financial representation of plans Recording transactions in accounts Comparing budgeted and actual results
Copyright © 2003 Pearson Education Canada Inc. Slide 1-7 Key Management Accounting Guidelines Cost-Benefit Approach spend resources if they promote decision making that better attains the organization’s goals in relation to the cost of these resources Pages Behavioural and Technical Considerations systems are not confined exclusively to technical matters always consider the influences of human activity Different Costs for Different Purposes define”cost” depending on the situation under consideration
Copyright © 2003 Pearson Education Canada Inc. Slide 1-8 Line and Staff Relationships Line management is directly responsible for attaining the objectives of the organization manager in a manufacturing division Pages Staff management exists to provide advice and assistance to line management management accountant Chief financial officer (CFO) oversees Controllership, Treasury, Tax, and Internal Audit functions in the organization
Copyright © 2003 Pearson Education Canada Inc. Slide 1-9 Functions of Management Accounting Management accountants perform three functions Attention-directing make visible opportunities and problems on which managers need to focus Problem-solving conduct comparative analysis to identify the best alternatives in relation to the organization’s goals Page 11 Scorekeeping accumulate data and report reliable results to all levels of management
Copyright © 2003 Pearson Education Canada Inc. Slide 1-10 Four Themes of Value Enhancement 3. Key success factors (KSFs) keep attention focused on critical factors relative to our competitors 4. Continuous improvement and benchmarking never-ending search for higher levels of performance Page Value-chain and supply-chain analysis manage these critical functions 1. Customer Focus attract and retain profitable customers
Copyright © 2003 Pearson Education Canada Inc. Slide 1-11 Key Themes in Management Decision Making Key Success Factors Cost and Efficiency Quality Time Innovation Continuous Improvement And Benchmarking Page 13 Value-Chain and Supply-Chain Analysis Customer Focus
Copyright © 2003 Pearson Education Canada Inc. Slide 1-12 The Value Chain Sequence of business functions in which utility (usefulness) is added to the products or services of an organization Management accounting helps managers to administer each of these business functions Research and Development Product, Service Process Design ProductionMarketingDistribution Customer Service Management Accounting Page 14
Copyright © 2003 Pearson Education Canada Inc. Slide 1-13 E-Business Value Matrix Business Criticality (Importance of the application to the success of the business) Page 16 High Low Operational Excellence Rational Experimentation New Fundamentals Breakthrough Strategies Low High Practice Innovation (Creating new markets or new ways of doing business)
Copyright © 2003 Pearson Education Canada Inc. Slide 1-14 Ethical Guidelines Professional accounting organizations play an important role in promoting high standards of ethics in the accounting profession Pages Code of Professional Ethics Society of Management Accountants of Canada (SMAC) Act in a responsible manner Maintain independence Maintain confidentiality of information Serve with courtesy and good faith Maintain standards of competence