Transcript Role of the Management Accountant

Chapter 1
The Accountant’s Role in the
Organization
Copyright © 2003 Pearson Education Canada Inc.
Slide 1-1
Management Accounting
• Management accounting measures and reports
financial and non-financial information that helps
managers make decisions to fulfill the goals of an
organization
• Managers use management accounting information to
• choose, communicate and implement strategy
• coordinate product design, production and
marketing decisions
• Management accounting focuses on internal reporting
• Management accounting is future oriented
Copyright © 2003 Pearson Education Canada Inc.
Pages 2-3
Slide 1-2
Financial Accounting
• Financial accounting measures and records business
transactions and provides financial statements that
are based on generally accepted accounting
principles (GAAP)
• Managers are responsible for the financial statements
issued to investors, government regulators, and other
parties outside the organization
• Financial accounting focuses on external parties
• Financial accounting reports on what happened in the
past
Copyright © 2003 Pearson Education Canada Inc.
Pages 2-3
Slide 1-3
Cost Accounting and Cost Management
• Cost accounting measures and reports information
relating to the cost of acquiring and utilizing
resources
• Cost accounting provides information for
management and financial accounting
• Cost management describes the approaches and
activities of managers in short-run and long-run
planning and control decisions
• These decisions increase value of customers and
lower costs of products and services
• Cost management is an integral part of a company’s
strategy
Copyright © 2003 Pearson Education Canada Inc.
Pages 3-4
Slide 1-4
Management Accountants and Strategy
• Strategy specifies how an organization matches its
own capabilities with opportunities in the marketplace
to accomplish its objectives
• Strategy examples
• Quality products or services at low prices (WestJet)
• Unique products or services at higher prices
(Clublink)
• Management accountants provide information to
management such as
• Who are our customers and suppliers
• Sensitivity of market to price, quality and service
• Industry characteristics (size, growth)
Copyright © 2003 Pearson Education Canada Inc.
Pages 4-6
Slide 1-5
Planning and Control
Management
Decisions
Management
Accounting System
PLANNING
Budgets
Feedback
• increase advertising
rates
• pages sold, rates per
page, revenue
Financial
representation
of plans
CONTROL
Action
• implement rate
increase
Performance
Evaluation
• comparison of actual
and budgeted revenues
Copyright © 2003 Pearson Education Canada Inc.
Accounting System
• invoices / receipts
recorded in ledger
Performance
Reports
• pages sold, rate per
page, revenue
Recording
transactions
in accounts
Comparing
budgeted and
actual results
Pages 6-8
Slide 1-6
Key Management Accounting Guidelines
Cost-Benefit Approach
• spend resources if they promote decision making that
better attains the organization’s goals in relation to
the cost of these resources
Behavioural and Technical Considerations
• systems are not confined exclusively to technical
matters
• always consider the influences of human activity
Different Costs for Different Purposes
• define”cost” depending on the situation under
consideration
Copyright © 2003 Pearson Education Canada Inc.
Pages 8 - 9
Slide 1-7
Line and Staff Relationships
• Line management is directly responsible for attaining
the objectives of the organization
• manager in a manufacturing division
• Staff management exists to provide advice and
assistance to line management
• management accountant
• Chief financial officer (CFO) oversees
• Controllership, Treasury, Tax, and Internal
Audit functions in the organization
Copyright © 2003 Pearson Education Canada Inc.
Pages 9 - 10
Slide 1-8
Functions of Management Accounting
• Management accountants perform three functions
Scorekeeping
• accumulate data and report reliable results to all
levels of management
Attention-directing
• make visible opportunities and problems on
which managers need to focus
Problem-solving
• conduct comparative analysis to identify the best
alternatives in relation to the organization’s goals
Copyright © 2003 Pearson Education Canada Inc.
Page 11
Slide 1-9
Four Themes of Value Enhancement
1. Customer Focus
• attract and retain profitable customers
2. Value-chain and supply-chain analysis
• manage these critical functions
3. Key success factors (KSFs)
• keep attention focused on critical factors relative
to our competitors
4. Continuous improvement and benchmarking
• never-ending search for higher levels of
performance
Copyright © 2003 Pearson Education Canada Inc.
Page 12 - 15
Slide 1-10
Key Themes in Management Decision Making
Customer
Focus
Value-Chain
and
Supply-Chain
Analysis
Key Success Factors
• Cost and Efficiency
• Quality
• Time
• Innovation
Copyright © 2003 Pearson Education Canada Inc.
Continuous
Improvement
And
Benchmarking
Page 13
Slide 1-11
The Value Chain
• Sequence of business functions in which utility
(usefulness) is added to the products or services of
an organization
• Management accounting helps managers to
administer each of these business functions
Research
and
Development
Product,
Service
Process
Design
Production
Customer
Marketing Distribution Service
Management Accounting
Copyright © 2003 Pearson Education Canada Inc.
Page 14
Slide 1-12
E-Business Value Matrix
Business
Criticality
(Importance
of the
application to
the success
of the
business)
High
Operational
Excellence
Breakthrough
Strategies
Low
New
Fundamentals
Rational
Experimentation
Low
High
Practice Innovation
(Creating new markets or new
ways of doing business)
Copyright © 2003 Pearson Education Canada Inc.
Page 16
Slide 1-13
Ethical Guidelines
• Professional accounting organizations play an
important role in promoting high standards of ethics in
the accounting profession
• Code of Professional Ethics
• Society of Management Accountants of Canada (SMAC)
• Act in a responsible manner
• Maintain independence
• Maintain confidentiality of information
• Serve with courtesy and good faith
• Maintain standards of competence
Copyright © 2003 Pearson Education Canada Inc.
Pages 15 - 20
Slide 1-14