1 - 1 the accountant’s role in the organization. 1 - 2 join khalid aziz l economics of icmap,...

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The Accountant’s Rolein the Organization

The Accountant’s Rolein the Organization

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JOIN KHALID AZIZJOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS,

B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4

ICAP MODULE B, B.COM, BBA, MBA & PIPFA. COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP

MODULE D, BBA, MBA & PIPFA.

CONTACT:0322-3385752R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,

KARACHI, PAKISTAN.

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Management AccountingManagement Accounting

It measures and reports financial andnonfinancial information that helps

managers make decisions to fulfill thegoals of an organization.

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Financial AccountingFinancial Accounting

Its focus is on reporting to external parties.

It provides financial statements based ongenerally accepted accounting principles.

It measures and records business transactions.

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Understand how management accountants affect strategic decisions.

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Strategic Cost ManagementStrategic Cost Management

Developing strategy

Building resources and capabilities

Implementing strategy

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Strategic Cost ManagementStrategic Cost Management

Current Assets

Long-TermProductive

Assets

Intangible Assets

Building resources and capabilities

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Distinguish between theplanning and control

decisions of managers.

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Planning and ControllingPlanning and Controlling

Management Decision Management Accounting System

Planning

Control

PerformanceEvaluation

Budgets

AccountingSystem

PerformanceReports

Fee

db

ack

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Planning and Controlling

What is planning?

Settinggoals

Predictingresults

Deciding howto attain goals

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Planning and Controlling

What is control?

Decidingand

takingactions

Deciding onperformanceevaluation

and feedback

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Planning and Controlling

What are budgets?

They arequantitativeexpressions

of a proposedplan of action.

They aid in thecoordination

andimplementation

of the plan.

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Planning and Controlling

What are performance reports?

These are reports thatcompare actual results

with budgeted amounts.

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Performance Report ExamplePerformance Report Example

Budget Actual VarianceRevenues $59,000 $60,000 $1,000 FCost of goods sold 42,000 43,400 1,400 UWages 6,700 7,000 300 UGeneral 1,300 900 400 FFixed costs 5,000 5,000 0 Operating income $ 4,000 $ 3,700 $ 300 U

Boone Shop, July 2003

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Performance Report ExamplePerformance Report Example

Actual cost of goods sold were72% of revenues instead of the budgeted 71%.

Budget % Actual %Revenues $59,000 100 $60,000 100Cost of goods sold 42,000 71 43,400 72Gross margin $17,000 29 $16,600 28

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FeedbackFeedback

This involves managers examining past performanceand systematically exploring alternative ways to

make better informed decisions in the future.

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Distinguish among the problem-solving, scorekeeping, andattention-directing roles of management accountants.

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Problem SolvingProblem Solving

This involves comparative analysisfor decision making.

This role asks: Of the several alternativesavailable, which is the best?

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ScorekeepingScorekeeping

This involves accumulating data andreporting reliable results toall levels of management.

This role asks: How is the business doing?

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Attention DirectingAttention Directing

This involves helping managersproperly focus their attention.

This role asks: Which opportunities andproblems should be emphasized first.

Attention directing should focus on allopportunities to add value to an organization,

not just cost-reduction opportunities.

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JOIN KHALID AZIZJOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS,

B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4

ICAP MODULE B, B.COM, BBA, MBA & PIPFA. COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP

MODULE D, BBA, MBA & PIPFA.

CONTACT:0322-3385752R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,

KARACHI, PAKISTAN.

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Identify four themes managersneed to consider for attaining success.

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Key Themes in ManagementDecision Making

Key Themes in ManagementDecision Making

Customer Focus

Value Chainand

Supply ChainAnalysis

Key Success Factors:Cost and Efficiency,

Time, Quality,Innovation

ContinuousImprovement

andBenchmarking

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Customer FocusCustomer Focus

The challenge facing managers is to continueinvesting sufficient (but not excessive)

resources in customer satisfactionsuch that profitable customers

are attracted and retained.

The challenge facing managers is to continueinvesting sufficient (but not excessive)

resources in customer satisfactionsuch that profitable customers

are attracted and retained.

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Value Chain andSupply Chain Analysis

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.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.

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

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 inthe same organization or other organizations.

Supply chain – describes the flow of goods,services, and information from cradle to grave,regardless of whether those activities occur inthe same organization or other organizations.

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Key Success FactorsKey Success Factors

These are operational factors that directly affectthe economic viability of the organization.

Cost – organizationsare under continuous

pressure to reduce costs.

Cost – organizationsare under continuous

pressure to reduce costs.

Quality – customersare expecting higher

levels of quality.

Quality – customersare expecting higher

levels of quality.

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Key Success FactorsKey Success Factors

Time – organizations are under pressure tocomplete activities faster and to meet

promised delivery dates more reliably.

Time – organizations are under pressure tocomplete activities faster and to meet

promised delivery dates more reliably.

Innovation – there is now heightened recognitionthat a continuing flow of innovative products

or services is a prerequisite to the ongoingsuccess of most organizations.

Innovation – there is now heightened recognitionthat a continuing flow of innovative products

or services is a prerequisite to the ongoingsuccess of most organizations.

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Continuous Improvementand Benchmarking

Continuous Improvementand Benchmarking

Continuous improvement by competitors createsa never-ending search for higher levels ofperformance within many organizations.

Continuous improvement by competitors createsa never-ending search for higher levels ofperformance within many organizations.

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Describe the set of businessfunctions in the value chain.

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JOIN KHALID AZIZJOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS,

B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4

ICAP MODULE B, B.COM, BBA, MBA & PIPFA. COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP

MODULE D, BBA, MBA & PIPFA.

CONTACT:0322-3385752R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,

KARACHI, PAKISTAN.

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Value ChainValue Chain

The term “value chain” refers to the sequence ofbusiness functions in which usefulness is addedto the products or services of an organization.

The term “value” is used because as the usefulnessof the product or service is increased, so is its value

to the customer.

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Value ChainValue Chain

Management accountants providedecision support for managers in the

following six business functions:

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Value ChainValue Chain

R & D Design Production

Marketing Distribution Service

Management Accounting

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Value Chain FunctionsValue Chain Functions

Research and Development

It is the process that is conducted to generateand experiment with ideas related to new

products, services, or processes.

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Value Chain FunctionsValue Chain Functions

It is the detailed planning and engineering of products, services, or processes.

Design

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Value Chain FunctionsValue Chain Functions

It is the acquisition, coordination, andassembly of resources to produce

a product or deliver a service.

Production

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Value Chain FunctionsValue Chain Functions

It is the manner by which companiespromote and sell their products

or services to customers or prospective customers.

Marketing

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Value Chain FunctionsValue Chain Functions

It is the delivery of products orservices to the customer.

Distribution

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Value Chain FunctionsValue Chain Functions

It is the after-sale support activitiesprovided to customers.

Service

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Describe three waysmanagement accountants

support managers.

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Key GuidelinesKey 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 ApproachCost-Benefit Approach

A cost-benefit approach should be used in orderto spend resources if they promote decisionmaking that better attains organization goals

in relation to the costs of those resources.

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Behavioral and TechnicalConsiderations

Behavioral and TechnicalConsiderations

A management accounting system should have twosimultaneous 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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Line and Staff RelationshipsLine and Staff Relationships

C o n tro ller A u d it T a x T rea su ry R iskM a n a g em en t

In v esto rR ela tio n s

C h ief F in a n cia l O fficer (C F O )

P res id en tC h ief O p era tin g O fficer (C O O )

C h a irm a nC h ief E x ecu tiv e O fficer (C E O )

B o a rd o f D irecto rs

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Line and Staff RelationshipsLine and Staff Relationships

* G lo b a l F in a n cia l P la n n in g /B u d g etin g* O p era tio n s A d m in is tra tio n* P ro fita b ility R ep o rtin g* In v en to ry

* R o y a lties* G en era l L ed g er* A cco u n ts P a y a b le a n d R eceiv a b le* S u b s id ia ry a n d L ia iso n A cco u n tin g

E x a m p les o f F u n ctio n s:

C o n tro ller

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JOIN KHALID AZIZJOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS,

B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4

ICAP MODULE B, B.COM, BBA, MBA & PIPFA. COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP

MODULE D, BBA, MBA & PIPFA.

CONTACT:0322-3385752R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,

KARACHI, PAKISTAN.