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Managerial Accounting

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Chapter 1 Managerial Accounting & the Business Environment 10/26/04 Managerial Accounting and Financial Accounting Differences Between Financial and Managerial ... – PowerPoint PPT presentation

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Title: Managerial Accounting


1
Managerial Accounting the Business
Environment10/26/04
Chapter 1
2
Managerial Accounting and Financial Accounting
Managerial accountingprovides informationfor
managers inside anorganization whodirect and
controlits operations.
Financial accountingprovides informationto
stockholders,creditors and otherswho are
outsidethe organization.
3
Differences Between Financial and Managerial
Accounting
4
Organizational Structure
Decentralization is the delegation of
decision-making authority throughout an
organization.
5
Management Accountants
  • Help management pursue the firms goals
  • Internal consultants or business analysts
  • Time spent interpreting data vs creating it
  • Physically positioned in operating department
  • Work on cross-functional teams
  • Extensive face-to-face communications
  • Actively involved in decision making
  • Trusted advisors

6
The Changing Business Environment
  • Growth of the internet
  • Accelerated pace in innovation of products and
    services
  • International competition

Business environment changes in the past twenty
years
7
The Changing Business Environment
Just-In-Time Total Quality Management Process
Reengineering Theory of Constraints
8
Just-in-Time (JIT) Concept
Receivecustomerorders.
Complete productsjust in time toship customers.
Scheduleproduction, pull system.
Complete partsjust in time forassembly into
products.
Receive materialsjust in time forproduction.
9
JIT Requirements
Zero productiondefects
Improveplant layout
A flexibleworkforce
Reducesetup time
JIT purchasing Fewer, but more ultra-reliable
suppliers. Frequent JIT deliveries in small
lots. Defect-free supplier deliveries.
10
Benefits of a JIT System
Reducedinventorycosts
Freed-up funds
Greatercustomersatisfaction
More rapidresponse tocustomer orders
11
Total Quality Management
Where are we? Where do we want to go?
Plan
Do we need to change the plan?
How do we start? Collect data
Act
Do
is
Check
How are we doing? Evaluate data.
12
Process Reengineering
  • Anticipated results
  • Process is simplified.
  • Process is completed in less time.
  • Costs are reduced.
  • Opportunities for errors are reduced.

A business processis diagrammedin detail.
The process isredesigned to includeonly those
steps that makeour product more
valuable. Eliminate non-value added steps.
Examples?
Every step inthe businessprocess mustbe
justified.
13
Theory of Constraints
  • A sequential process of identifying and
    removing constraints in a system.

Restrictions or barriers that impedeprogress
toward an objective
14
Theory of Constraints
Only actions that strengthen the weakest link in
the chain improve the process.
2. Identify process constraints
1. Measure process capacity
3. Eliminate bottlenecks
4. Coordinate processes See Exhibit 1-5
15
Importance of Ethicsin Accounting
  • Ethical accounting practices build trust and
    promote loyal, productive relationships with
    users of accounting information.
  • Many companies and professional organizations,
    such as the Instituteof Management Accountants
    (IMA),have written codes of ethics whichserve
    as guides for employees.
  • Code of Conduct for Management Accountants

16
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

17
IMA Code of Ethics for Management Accountants
Follow applicable laws, regulations and
standards. (Worldcom?)
Maintain professional competence.
Competence
Prepare complete and clear reports after
appropriate analysis. (Enron?)
18
IMA Code of Ethics for Management Accountants
Do not disclose confidential information unless
legally obligated to do so. (Sam Waxell)
Do not use confidential information for personal
advantage. (Martha Stewart)
Confidentiality
Ensure that subordinates do not disclose
confidential information.
19
IMA Code of Ethics for Management Accountants
Avoid conflicts of interest and advise others of
potential conflicts.
Do not subvert organizations legitimate
objectives.
Integrity
Recognize and communicate personal and
professional limitations.
20
IMA Code of Ethics for Management Accountants
Integrity
21
IMA Code of Ethics for Management Accountants
Communicate information fairly and objectively.
Objectivity
Disclose all information that might be useful to
management.
22
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.

23
IMA Code of Ethics for Management Accountants
  • Resolution of Ethical Conflict
  • Clarify issues in a confidential discussion
    withan objective advisor.
  • Consult an attorney as to legal obligations.
  • The last resort is to resign.

24
End of Chapter 1
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