Transcript Chapter 1
Chapter
1
Managerial Accounting and the Business Environment
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).
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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.
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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.
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Work of Management Planning Directing and Motivating Controlling
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Planning and Control Cycle
Formulating long- and short-term plans (Planning) Begin Comparing actual to planned performance (Controlling) Decision Making Implementing plans (Directing and Motivating) 1-6 Measuring performance (Controlling) © McGraw-Hill Ryerson Limited., 2004
Comparison of Financial and Managerial Accounting 1. Users 2. Time focus 3. Emphasis 4. Importance 5. Subject focus 6. Requirements Financial Accounting External persons who make financial decisions Historical perspective Objectivity and Verifiability Precision of information Summarized data for the whole organization Must follow GAAP and required for external reports Managerial Accounting Managers who plan for and control an organization Future emphasis Relevance for planning and control Timeliness of information Detailed segment reports of an organization Need not follow GAAP and no mandatory use
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Expanding Role of Managerial Accounting
Increasing complexity and size of organizations Regulatory environment Factors that increase the need for managerial accounting information World-wide competition Increased emphasis on quality 1-8 Rapid development and implementation of technology © McGraw-Hill Ryerson Limited., 2004
Organizational Structure
An organization is a group of people united for a common purpose.
Corporate Organization Chart Board of Directors Purchasing President Personnel Vice President Operations Chief Financial Officer Treasurer Controller
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Decentralization
Decentralization is the delegation of decision making authority throughout an organization.
Corporate Organization Chart Board of Directors Purchasing President Personnel Vice President Operations Chief Financial Officer Treasurer Controller
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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 and assist line positions.
support Example: Cost accountants in the manufacturing plant.
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The Controller
The chief accountant in an organization with responsibility for: Financial planning and analysis.
Cost control. Financial reporting.
Accounting information systems.
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The Professional Management Accountant
Three types of professional accountants work as management accountants in Canada: CGA.
CA. CMA.
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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
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The Changing Business Environment New tools for managers! Just-In-Time Total Quality Management Process Reengineering Theory of Constraints
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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.
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Key Elements for a Successful JIT System Improved plant layout Zero production defects
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Reduced setup time Flexible workforce JIT purchasing Fewer, but more ultra-reliable suppliers.
Frequent JIT deliveries in small lots.
Defect-free supplier deliveries.
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Benefits of a JIT System Reduced inventory costs Greater customer satisfaction
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Higher quality products Less warehouse space needed More rapid response to customer orders
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Total Quality Management
Benchmarking Where are we?
Where do we want to go?
Plan
Do we need to change the plan?
Act
is
Do
How do we start?
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Check
How are we doing? Continuous Improvement © McGraw-Hill Ryerson Limited., 2004
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.
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Process Reengineering
A business process is diagrammed in detail.
Every step in the business process must be justified.
Anticipated results:
Process is simplified.
Process is completed in less time.
Costs are reduced.
Opportunities for errors are reduced.
The process is redesigned to include only those steps that make the product more valuable.
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Theory of Constraints
A sequential process of identifying and removing constraints in a system.
Restrictions or barriers that impede progress toward an objective 1-22 © McGraw-Hill Ryerson Limited., 2004
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.
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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. 1-24 © McGraw-Hill Ryerson Limited., 2004
IFAC Code of Ethics for Professional Accountants
Competence Confidentiality Integrity Objectivity © McGraw-Hill Ryerson Limited., 2004 1-25
End of Chapter 1
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