managerial accounting and the business environment chapter 1
Post on 19-Dec-2015
247 views
TRANSCRIPT
Managerial Accounting and the Business
Environment
Chapter
1
© McGraw-Hill Ryerson Limited., 2004
1-2
Learning Objectives
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).
After studying this chapter, you should be able to:
© McGraw-Hill Ryerson Limited., 2004
1-3
Learning Objectives
4. Discuss the impact of international competition on businesses and on managerial accounting.
5. Explain the importance of upholding ethical standards.
After studying this chapter, you should be able to:
© McGraw-Hill Ryerson Limited., 2004
1-4
Managerial Accounting and Financial Accounting
Managerial accountingprovides informationto managers of anorganization whodirect and control
its operations.
Financial accountingprovides information
to stockholders,creditors, and others
who are outsidethe organization.
© McGraw-Hill Ryerson Limited., 2004
1-5
Work of Management
Planning
Controlling
Directing and Motivating
© McGraw-Hill Ryerson Limited., 2004
1-6
Planning and Control Cycle
DecisionMaking
Formulating long- andshort-term plans
(Planning)
Measuringperformance (Controlling)
Implementing plans (Directing and
Motivating)
Comparing actual toplanned performance
(Controlling)
Begin
© McGraw-Hill Ryerson Limited., 2004
1-7
Comparison of Financial and Managerial Accounting
Financial ManagerialAccounting Accounting
1. Users External persons who Managers who plan formake financial decisions and control an organization
2. Time focus Historical perspective Future emphasis
3. Emphasis Objectivity and Relevance Verifiability for planning and control
4. Importance Precision of information Timeliness of information
5. Subject focus Summarized data for Detailed segment reportsthe whole organization of an organization
6. Requirements Must follow GAAP Need not follow GAAPand required for and no mandatory useexternal reports
© McGraw-Hill Ryerson Limited., 2004
1-8
Expanding Role of Managerial Accounting
Increasing complexity andsize of organizations
Rapid development andimplementation of technology
Regulatoryenvironment
World-widecompetition
Increasedemphasison quality
Factors thatincrease the need for
managerial accountinginformation
© McGraw-Hill Ryerson Limited., 2004
1-9
Corporate Organization Chart
Purcha sing Personnel V ice PresidentO pera tions
T rea surer C ontro ller
C hief F ina ncia lO fficer
President
B oa rd of D irectors
Organizational Structure
An organization is a group of peopleunited for a common purpose.
An organization is a group of peopleunited for a common purpose.
© McGraw-Hill Ryerson Limited., 2004
1-10
Decentralization
Decentralizatio
n
decision–making
Decentralization
decision–making
Decentralization is the delegation of decision-making authority throughout an organization.
Decentralization is the delegation of decision-making authority throughout an organization.
Corporate Organization Chart
Purcha sing Personnel V ice PresidentO pera tions
T rea surer C ontro ller
C hief F ina ncia lO fficer
President
B oa rd of D irectors
© McGraw-Hill Ryerson Limited., 2004
1-11
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.
© McGraw-Hill Ryerson Limited., 2004
1-12
The Controller
The chief accountant in an organization with responsibility for:Financial planning and analysis.Cost control. Financial reporting.Accounting information systems.
The chief accountant in an organization with responsibility for:Financial planning and analysis.Cost control. Financial reporting.Accounting information systems.
© McGraw-Hill Ryerson Limited., 2004
1-13
The Professional Management Accountant
Three types of professional accountants work as management accountants in Canada:CGA.CA. CMA.
Three types of professional accountants work as management accountants in Canada:CGA.CA. CMA.
© McGraw-Hill Ryerson Limited., 2004
1-14
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
© McGraw-Hill Ryerson Limited., 2004
1-15
The Changing Business Environment
Just-In-Time
Total Quality Management
Process Reengineering
Theory of Constraints
New tools for managers!
© McGraw-Hill Ryerson Limited., 2004
1-16
Complete productsjust in time to
ship to customers.
Complete partsjust in time for
assembly into products.
Receive materialsjust in time for
production.
Scheduleproduction.
Just-in-Time (JIT) Systems
Receivecustomer
orders.
© McGraw-Hill Ryerson Limited., 2004
1-17
Flexibleworkforce
Flexibleworkforce
Reducedsetup time
Reducedsetup time
Zero productiondefects
Zero productiondefects
Key Elements for a SuccessfulJIT System
Improvedplant layout
Improvedplant layout
JIT purchasingFewer, but more ultra-reliable suppliers.
Frequent JIT deliveries in small lots.Defect-free supplier deliveries.
JIT purchasingFewer, but more ultra-reliable suppliers.
Frequent JIT deliveries in small lots.Defect-free supplier deliveries.
© McGraw-Hill Ryerson Limited., 2004
1-18
More rapidresponse to
customer orders
More rapidresponse to
customer ordersLess warehouse
space needed
Less warehousespace needed
Reducedinventory
costs
Reducedinventory
costs
Greatercustomer
satisfaction
Greatercustomer
satisfaction
Higher qualityproducts
Benefits of a JIT System
© McGraw-Hill Ryerson Limited., 2004
1-19
Do we need to change the plan?
Where are we?
Where do we want to go?
How do we start?
How are we doing?
Check
Plan
Act Dois
Total Quality Management
Benchmarking
ContinuousImprovement
© McGraw-Hill Ryerson Limited., 2004
1-20
Process Reengineering
The process isredesigned to include
only those steps that addvalue to the product.
Every step inthe businessprocess mustbe justified.
A business processis diagrammed
in detail.
© McGraw-Hill Ryerson Limited., 2004
1-21
Process Reengineering
Anticipated results: Process is simplified. Process is completed in less time. Costs are reduced. Opportunities for errors are reduced.
The process isredesigned to include
only those steps that makethe product more valuable.
Every step inthe businessprocess mustbe justified.
A business processis diagrammed
in detail.
© McGraw-Hill Ryerson Limited., 2004
1-22
Theory of Constraints
A sequential process of identifying and removing constraints in a system.
Restrictions or barriers that impedeprogress toward an objective
© McGraw-Hill Ryerson Limited., 2004
1-23
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.
© McGraw-Hill Ryerson Limited., 2004
1-24
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 thatserve as guides.
© McGraw-Hill Ryerson Limited., 2004
1-25
IFAC Code of Ethics for Professional Accountants
Competence
Confidentiality
Integrity
Objectivity
Competence
Confidentiality
Integrity
Objectivity
© McGraw-Hill Ryerson Limited., 2004
1-26
End of Chapter 1