1. GARRISON NOREEN
Managerial Accounting
tenth Edition

2. Managerial Accounting and the Business Environment
Chapter1
Managerial Accounting and the Business Environment

3. Managerial Accounting and Financial Accounting
Managerial accounting provides information for managers of an organization who direct and control its operations.
Financial accounting provides information to stockholders, creditors and others who are outside the organization.

4. Directing and Motivating
Work of Management
Planning
Directing and Motivating
Controlling

5. Planning and Control Cycle
Formulating Long-and Short-Term Plans (Planning)
Begin
Comparing Actual to Planned Performance (Controlling)
Implementing the Plans (Directing and Motivating)
Decision Making
Measuring Performance (Controlling)

6. Differences Between Financial and Managerial Accounting

7. Expanding Role of Managerial Accounting
Increasing complexity and size of organizations
Regulatory environment
Factors that increase the need for managerial accounting information
Increased emphasis on quality
World-wide competition
Rapid development and implementation of technology

8. 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

9. The Changing Business Environment
New tools for managers!
Just-In-Time
Total Quality Management
Process Reengineering
Theory 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. Key Elements for a Successful JIT System
Zero production defects
Improved plant layout
Reduced setup time
Flexible workforce
JIT purchasing
Fewer, but more ultrareliable suppliers.
Frequent JIT deliveries in small lots.
Defect-free supplier deliveries.

12. Benefits of a JIT System
Reduced inventory costs
Greater customer satisfaction
Higher quality products
More rapid response to customer orders
Less warehouse space needed

13. Total Quality Management
Benchmarking
Where are we?
Where do we want to go?
Check
Plan
Act Do is
Do we need to change the plan?
How do we start?
Continuous Improvement
How are we doing?

14. Process Reengineering
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. Process Reengineering
A business process is diagrammed in detail.
Anticipated results:
Process is simplified.
Process is completed in less time.
Costs are reduced.
Opportunities for errors are reduced.
Every step in the business process must be justified.
The process is redesigned to include only those steps that make our product more valuable.

16. Restrictions or barriers that impede progress toward an objective
Theory of Constraints
A sequential process of identifying and removing constraints in a system.
Restrictions or barriers that impede progress toward an objective

17. 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.

18. Organizational Structure
An organization is a group of people united for a common purpose.

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

20. Line and Staff Relationships
Line positions 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.

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

22. 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.

23. IMA Code of Ethics for Management Accountants
Competence
Confidentiality
Integrity
Objectivity
Resolution of Ethical Conflict

24. 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.

25. 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.

26. IMA Code of Ethics for Management Accountants
Avoid conflicts of interest and advise others of potential conflicts.
Do not subvert organization’s legitimate objectives.
Integrity
Recognize and communicate personal and professional limitations.

27. IMA Code of Ethics for Management Accountants
Avoid activities that could affect your ability to perform duties.
Refrain from activities that could discredit the profession.
Refuse gifts or favors that might influence behavior.
Integrity
Communicate unfavorable as well as favorable information.

28. IMA Code of Ethics for Management Accountants
Communicate information fairly and objectively.
Objectivity
Disclose all information that might be useful to management.

29. 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.

30. IMA Code of Ethics for Management Accountants
Resolution of Ethical Conflict
Clarify issues in a confidential discussion with an objective advisor.
Consult an attorney as to legal obligations.
The last resort is to resign.

31. End of Chapter 1