chapter#01 managerial accounting and the business environment

7/28/2019 Chapter#01 Managerial Accounting and the Business Environment

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Management Accounting

Welcome to 4th, 5th and 6th Batch


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First Chapter

Managerial Accounting and

the Business Environment


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What we learn from this chapter

Definition

Need for managerial accounting information

Comparison of financial and managerial

accountingChanging business environment-JIT, TQM,PR, TOC

Technology in business

Code of conduct for managementaccountants

The Certified Management Accountant


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Welcome to this session

Topic

Definition of Managerial Accounting


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Definition of Managerial Accounting

Managerial Accounting:The phase of accountingconcerned with providinginformation to managers for useinside the organization i.e.

planning and controllingoperations and in decisionmaking.


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Need for managerial accounting information

Every managers do three

majors activities:

a. Planning

b. directing and motivating, and

c. Controlling


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Planning

Planning involves establishing

a basic strategy, deflecting a

course of action, andspecifying how the action will

be implemented.


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Directing and motivating

Directing and motivating

involves mobilizing people to

carry out plans and run routineoperations.


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Controlling

Controlling involves ensure that theplan is actually carried out and isappropriately modified as

circumstances change.Management accounting informationplays a vital role in these basicmanagement activities-but mostparticularly in the planning and controlfunctions.


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Planning and Control Cycle

Formulating

long and short

term plans

(planning)

Comparing actualto planned

performance

(controlling)

Decision makingImplementing plans

(directing

and

motivating)

Measuring

Performance

(controlling)


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Comparison of financial and managerial accounting

Financial Accounting Managerial Accounting

Reports to those outsidethe organization for:

owners, lenders, tax

authorities, regulators

Reports to those insidethe organization for:

planning, directing and

motivating, controlling,

performance evaluation.

Emphasizes financial

consequences of past

activities

Emphasizes decisions

affecting the future.

Emphasizes objectivity

and variability.

Emphasizes relevance.

Emphasizes precision Emphasizes timeliness

Emphasizes summary

date

Emphasizes detailed

segment** **


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Changing business environment-JIT, TQM, PR, TOC

Theory

Of Constraints

Process

Reengineering

Total

Quality

Management

Just in

time

Business

Environment


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Just in Time

A production and inventorycontrol system in whichmaterials are purchased andunits are produced only as

needed to meet actualcustomer demand.

Raw materials: Raw materials

are the materials that are usedto make a product.


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Work in process: Work inprocess inventories

consists of units of productthat are only partiallycompleted and will require

further work before they areready for sale to customer.


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Finished Goods: Finished goods

inventories consists of units of product

that have been completed but have not

been sold to customers.


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The JIT Concept

Under ideal conditions, a company

operating a just in time system would

purchase only enough materials each day

to meet that days needs.

Materials are received JIT to go into

production.

Products are completed JIT to be shipped

to customers.


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Benefits of a JIT System

Funds that were tied up in inventories can be

used elsewhere.

Areas previously used to store inventories are

made available for other, more productive use.Throughput time is reduced, resulting in greater

potential output and quicker response to

customers.

Defect rates are reduced, resulting in less waste

and greater customer satisfaction.


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Total Quality Management (TQM)

An approach to continuousimprovement that focuses

on customers and usingteams of front line workers

to systematically identityand solve problems.


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Characteristics

A focus on serving customers

Systematic problem solving using team

made up of front line workers.

Benchmarking: A study of

organizations that are among the best

in the world at performing a particulars

task.


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Plan-Do Check-Act (PADC) Cycle

Plan

Do

Act

Check


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Plan

Study the current process

Collect data

Analyze the data to identify possiblecauses.

Develop a plan for improvement

Decide how to measure improvement


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Do

Implement that plan on a small scale if

possible

Collect data


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Check

Evaluate the data collected during the do

phase


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Act

If successful, make the change

permanent.

If the results are not successful, try

again.


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Process Reengineering

An approach to improvement

that involves completely

redesigning business processin order to eliminate

unnecessary steps, reduce

errors, and reduce costs.


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Theory of Constraints (TOT)

A management approach that

emphasizes the importance of

managing constraints.


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Technology in business

E-commerce

Enterprise system


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E-commerce

E-commerce refers to business that is

conducted using the internet. At the start

of the new millennium, E-commerce was

riding high.


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Enterprise system

A software system that

integrates data from across an

organization into a singlecentralized database that

enables all employees to

access a common set of data.


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Code of conduct for

management accountants

Principles

Honestly

FairnessObjectivity

Responsibility


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Standards

Competence

ConfidentialityIntegrity

credibility


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Competence

Knowledge and skills

Relevant laws, regulations and technicalstandard

Accurate, clear, concise and timely

Successful performance


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Confidentiality

Legally required

Ensure compliance

Unethical advantages


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Integrity

Potential conflict

Duties ethically

Discredit the profession


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Credibility

Fairly and objectivity

Reports, analysis

Organization policy


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The Certified Management

Accountant

File application

Three years period

CMA examinationEthical professional practice


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Thanks

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