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

2. Learning Objectives
After studying this chapter, you should be able to:
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).

3. Learning Objectives
After studying this chapter, you should be able to:
4. Discuss the impact of international competition on businesses and on managerial accounting.
5. Explain the importance of upholding ethical standards.

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

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

6. Planning and Control Cycle
Formulating long- and short-term plans (Planning)
Begin
Comparing actual to planned performance (Controlling)
Implementing plans (Directing and Motivating)
Decision Making
Measuring performance (Controlling)

7. Comparison of Financial and Managerial Accounting

8. 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

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

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

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.

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

13. The Professional Management Accountant
Three types of professional accountants work as management accountants in Canada:
CGA.
CA.
CMA.

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

15. The Changing Business Environment
New tools for managers!
Just-In-Time
Total Quality Management
Process Reengineering
Theory of Constraints

16. Just-in-Time (JIT) Systems
Receive customer orders.
Complete products just in time to ship to customers.
Schedule production.
Receive materials just in time for production.
Complete parts just in time for assembly into products.

17. Key Elements for a Successful JIT System
Zero production defects
Improved plant layout
Reduced setup time
Flexible workforce
JIT purchasing
Fewer, but more ultra-reliable suppliers.
Frequent JIT deliveries in small lots.
Defect-free supplier deliveries.

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

19. 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?

20. 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 add value to the product.

21. 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 the product more valuable.

22. 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

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.

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 that serve as guides.

25. IFAC Code of Ethics for Professional Accountants
Competence
Confidentiality
Integrity
Objectivity

26. End of Chapter 1