The Accountants Role in the Organization

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The Accountants Rolein the Organization
Chapter 1
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Learning Objective 1
Describe how cost accounting supports management
accounting and financial accounting.
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How does management accounting Differ from
financial accounting?
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Management Accounting
It measures and reports financial
and nonfinancial information that helps managers
make decisions to fulfill the goals of an
organization.
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Financial Accounting
Its focus is on reporting to external parties.
It measures and records business transactions.
It provides financial statements based
on generally accepted accounting principles.
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Cost Accounting
It provides information for both management
accounting and financial accounting.
It measures and reports financial and
nonfinancial data.
_____ accounting systems provide information for
management and financial accounting.
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Cost Management
It describes the activities of managers in
planning and control of costs.
It includes the continuous reduction of costs.
It is a key part of general management
strategies and their implementation.
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Learning Objective 2
Understand how management accountants affect
strategic decisions.
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Strategic Cost Management
Developing strategy
Building resources and capabilities
Implementing strategy
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_____ specifies how an organization matches its
own capabilities with the marketplace
opportunities to accomplish its objectives.  a.
Budget   b. Strategy   c. Marketing   d.
Feedback
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Strategic Cost Management
Building resources and capabilities
Current Assets
Long-Term Productive Assets
Intangible Assets
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. Managers match their knowledge of the _____
and _____ that exist in the industry with the
resources and capabilities of their company.
 a. strengths, weaknessesb. strengths,
threatsc. opportunities, strengths d.
opportunities, threats
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Learning Objective 3
Distinguish between the planning and
control decisions of managers.
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Describe the planning system, the control
system, and how feedback provides the link
between the two systems. 
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Planning and Controlling
Management Decision
Management Accounting System
Planning
Budgets
Feedback
Control
Accounting System
Performance Evaluation
Performance Reports
A common tool used in the planning system is the
budget, which is a quantitative expression of
the proposed management plan of action.
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Planning and Controlling
What is planning?
Setting goals
Predicting results
Deciding how to attain goals
The planning system involves selecting
organization goals, predicting results, deciding
how to attain the desired goals .
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Planning and Controlling
What is control?
Deciding and taking actions
Deciding on performance evaluation and feedback
The control system involves taking actions to
implement the planning decisions and then
deciding how to evaluate performance of the
actions.
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The control process involves taking actions
that _____ the planning process decisions.  a.
implement b. selecting c. predict d.
communicate
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Planning and Controlling
What are budgets?
They are quantitative expressions of a
proposed plan of action.
They aid in the coordination and implementation of
the plan.
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Planning and Controlling
What are performance reports?
These are reports that compare actual
results with budgeted amounts.
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Performance Report Example
Boone Shop, July 2003
Budget Actual
Variance Revenues 59,000 60,000 1,000
F Cost of goods sold 42,000 43,400 1,400
U Wages 6,700 7,000 300
U General 1,300 900 400
F Fixed costs 5,000 5,000 0
Operating income 4,000 3,700 300 U
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Performance Report Example
Actual cost of goods sold were 72 of revenues
instead of the budgeted 71.
Budget Actual
Revenues 59,000 100 60,000 100 Cost of
goods sold 42,000 71 43,400 72 Gross
margin 17,000 29 16,600 28
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Feedback
This involves managers examining past
performance and systematically exploring
alternative ways to make better informed
decisions in the future.
Feedback is the link between planning and control
systems. Control system involves determining
what feedback to provide to help in future
decision making.
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The planning process and the control process are
linked by   a.. predictions   b. feedback  
c. budgets   d. marketing
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Learning Objective 4
Distinguish among the problem- solving,
scorekeeping, and attention-directing roles of
management accountants.
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What are three roles that management Accounting
perform?
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Problem Solving
This involves comparative analysis for decision
making.
This role asks Of the several alternatives availa
ble, which is the best?
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Scorekeeping
This involves accumulating data and reporting
reliable results to all levels of management.
This role asks How is the business doing?
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Attention Directing
This involves helping managers properly focus
their attention.
This role asks Which opportunities and problems
should be emphasized first.
Attention directing should focus on
all opportunities to add value to an
organization, not just cost-reduction
opportunities.
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Learning Objective 5
Identify four themes managers need to consider
for attaining success.
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Key Themes in ManagementDecision Making
Customer Focus
Value Chain and Supply Chain Analysis
Key Success Factors Cost and Efficiency, Time,
Quality, Innovation
Continuous Improvement and Benchmarking
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Customer Focus
The challenge facing managers is to
continue investing sufficient (but not
excessive) resources in customer
satisfaction such that profitable customers are
attracted and retained.
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Value Chain andSupply Chain Analysis
This theme has two related aspects
1. Treat each of the business functions in the
value chain as an essential and valued
contributor.
2. Integrate and coordinate the efforts of all
business functions in addition to developing
the capabilities of each individual business
function.
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Value Chain andSupply Chain Analysis
Supply chain describes the flow of
goods, services, and information from cradle to
grave, regardless of whether those activities
occur in the same organization or other
organizations.
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Key Success Factors
These are operational factors that directly
affect the economic viability of the organization.
Cost organizations are under continuous pressure
to reduce costs.
Quality customers are expecting higher levels
of quality.
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Key Success Factors
Time organizations are under pressure
to complete activities faster and to
meet promised delivery dates more reliably.
Innovation there is now heightened
recognition that a continuing flow of innovative
products or services is a prerequisite to the
ongoing success of most organizations.
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Continuous Improvementand Benchmarking
Continuous improvement by competitors creates a
never-ending search for higher levels
of performance within many organizations.
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Learning Objective 6
Describe the set of business functions in the
value chain.
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Value Chain
The term value chain refers to the sequence
of business functions in which usefulness is
added to the products or services of an
organization.
The term value is used because as the
usefulness of the product or service is
increased, so is its value to the customer.
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Value Chain
Management accountants provide decision support
for managers in the following six business
functions
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Value Chain
R D
Design
Production
Management Accounting
Marketing
Distribution
Service
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Value Chain Functions
Research and Development
It is the process that is conducted to
generate and experiment with ideas related to
new products, services, or processes.
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Value Chain Functions
Design
It is the detailed planning and engineering of
products, services, or processes.
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Value Chain Functions
Production
It is the acquisition, coordination, and assembly
of resources to produce a product or deliver a
service.
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Value Chain Functions
Marketing
It is the manner by which companies promote and
sell their products or services to customers or
prospective customers.
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Value Chain Functions
Distribution
It is the delivery of products or services to the
customer.
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Value Chain Functions
Service
It is the after-sale support activities provided
to customers.
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Learning Objective 7
Describe three ways management accountants
support managers.
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Key Guidelines
1. Cost-benefit approach
2. Full recognition of behavioral as well as
technical considerations
3. Using different costs for different purposes
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Cost-Benefit Approach
A cost-benefit approach should be used in
order to spend resources if they promote
decision making that better attains organization
goals in relation to the costs of those resources.
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Behavioral and TechnicalConsiderations
A management accounting system should have
two simultaneous missions for providing
information
1. To help managers make wise economic decisions
2. To help managers and other employees to aim
and strive for goals of the organization
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Different Costs forDifferent Purposes
A cost concept used for the external
reporting purpose need not be the appropriate
concept for the purpose of internal routine
reporting to managers.
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Learning Objective 8
Understand how cost management accounting fits
into an organizations structure.
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Line and Staff Relationships
Line management is directly responsible
for attaining the objectives of the organization.
Staff management exists to provide advice and
assistance to line management.
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Line and Staff Relationships
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Line and Staff Relationships
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Learning Objective 9
Understand what professional ethics mean to
management accountants.
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Professional Ethics
Competence
Integrity
Confidentiality
Objectivity
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Ethical Guidelines
The Institute of Management Accountants (IMA) is
the largest association of management accountants
in the United States.
The IMA has issued a Standards of Ethical Conduct
for Management Accountant.
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An example of the characteristic of _____ would
be to avoid actual or apparent conflicts of
interest.  a. competence b.
confidentiality c. integrity d. objectivity
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End of Chapter 1