Managerial Accounting (lesson 1)

Slide 1: Chapter 1 Managerial Accounting & the Business Environment

Slide 2: Managerial Accounting and Financial Accounting Managerial accounting Financial accounting provides information provides information for managers inside an to stockholders, organization who creditors and others direct and control who are outside its operations. the organization. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 3: Work of Management Planning Directing and Motivating Controlling © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 4: Exh. 1-1 Planning and Control Cycle Formulating long- Begin and short-term plans (Planning) Comparing actual Implementing Decision to planned plans (Directing performance Making and Motivating) (Controlling) Measuring performance (Controlling) © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 5: Differences Between Financial and Managerial Accounting © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 6: Organizational Structure Decentralization is the delegation of decision-making authority throughout an organization. C o rp o ra te O rg a n iz a tio n C h a rt B o a r d o f D ir e c t o r s P r e s id e n t P u r c h a s in g P e rso n n e l V ic e P r e s id e n t C h ie f F in a n c ia l O p e r a t io n s O f f ic e r T re a s u re r C o n t r o lle r © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 7: Line and Staff Relationships Line position are directly Staff positions support and related to achievement of assist line positions. the basic objectives of an Example: Cost  organization. accountants in the manufacturing plant. Example: Production  supervisors in a manufacturing plant. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 8: The Changing Business Environment Growth of the internet Just-in-Time production Total Quality Management Business environment changes in the past International competition twenty years © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 9: The Changing Business Environment New tools for managers! Just-In-Time Total Quality Management Process Reengineering Theory of Constraints © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 10: Just-in-Time (JIT) Systems Receive Complete products customer just in time to orders. ship customers. Schedule production. Complete parts Receive materials just in time for just in time for assembly into products. production. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 11: JIT Consequences Zero production Improved defects plant layout Reduced Flexible setup time workforce JIT purchasing Fewer, but more ultrareliable suppliers. Frequent JIT deliveries in small lots. Defect-free supplier deliveries. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 12: Benefits of a JIT System Reduced Freed-up funds inventory costs Greater customer satisfaction Higher quality products More rapid response to Increased customer orders throughput © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 13: Total Quality Management Where are we? Benchmarking Where do we want to go? Plan Do we need How do to change Act Do is we start? the plan? Continuous Check Improvement How are we doing? © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 14: Process Reengineering Anticipated results: A business process Process is simplified. is diagrammed Process is completed in detail. in less time. Costs are reduced. Opportunities for errors are reduced. Every step in The process is the business redesigned to include process must only those steps that make be justified. our product more valuable. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 15: Theory of Constraints A sequential process of identifying and removing constraints in a system. Restrictions or barriers that impede progress toward an objective © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 16: Theory of Constraints Only actions 2. Identify that strengthen process the weakest link constraints in the “chain” improve the process. 1. Measure 3. Use process bottlenecks capacity effectively. 4. Coordinate processes © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 17: Theory of Constraints Process Capacity A measure of a System process’s ability Constraint to transform The point in a resources into system that value products limits the overall and services. output of the system. Often called the “bottleneck.” © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 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. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 19: E-Commerce During 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) © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 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 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 21: IMA Code of Ethics for Management Accountants Four broad areas of responsibility: Maintain a high level of professional competence treat sensitive matters with confidentiality Maintain personal integrity Be objective in all disclosures © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 22: IMA Code of Ethics for Management Accountants Follow applicable laws, regulations and standards. Maintain Competence professional competence. Prepare complete and clear reports after appropriate analysis. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 23: IMA Code of Ethics for Management Accountants Do not disclose confidential information unless legally obligated to do so. Do not use confidential Confidentiality information for personal advantage. Ensure that subordinates do not disclose confidential information. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 24: IMA Code of Ethics for Management Accountants Avoid conflicts of interest and advise others of potential conflicts. Do not subvert organization’s Integrity legitimate objectives. Recognize and communicate personal and professional limitations. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 25: IMA Code of Ethics for Management Accountants Avoid activities that could affect your ability to perform duties. Refrain from Refuse gifts activities that or favors that Integrity could might discredit the influence profession. behavior. Communicate unfavorable as well as favorable information. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 26: IMA Code of Ethics for Management Accountants Communicate information fairly and objectively. Objectivity Disclose all information that might be useful to management. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 27: 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. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 28: 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. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin

Slide 29: End of Chapter 1 © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin