ma-session 1.lbsim

8/7/2019 MA-SESSION 1.LBSIM

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How to Study Accounting

Successfully

Your Goals in Studying the

course


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Skill Set Required to be SuccessfulSkill Set Required to be Successful

in Business world are:in Business world are:

Communication

Skills

SKILL SET

Technical / Analytical

Skills

Interpersonal

Skills

Personal/Self

Skills


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Preview

Teaching/Learning

Cycle

Meaning and Objectives

Assign

Presen

t

Expla

inReview

Te

st

Re

ad

ApplyReview

Reca

ll&

Demons

tra

te

Learnin

gO

bje

ctives

Assig

nments

ChapterReview

Ex

amin

ati

on

and

oth

ereva

lua

tio

nPreview

Learning objective

Structure

Learning Cycle

Teaching Cycle

Teaching Learning Cycle


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MY INSTRUCTIONS TO THE

STUDENTS

Read and understand the learningobjectives carefully

Study your courseoutline and know the

rules of the course Realize that in this course each session

builds on the previous one

Prior preparation for the class a must!


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Learning Aids

Textbook

Corporate Insights and DecisionPoints Power-point inputs lecture

Review and reinforcement throughreadings Presentations and reports


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MANAGEMENTMANAGEMENT

ACCOUNTINGACCOUNTING

Learning Facilitator

Dr. Kanwal Anil

Associate Professor (Finance),

Email: [email protected]
mailto:[email protected]:[email protected]


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1-8

The Changing Role of

Managerial Accounting in a

Dynamic Business

Environment

1 ChapterChapterOneOne


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A Brief History The history of management accounting

comprises two characteristics:1. Management accounting was driven by the

evolution of organizations and their

strategic imperatives When cost control was the goal, costing systems

became more accurate

When the ability of organizations to adapt andchange to environmental changes became

important, management accounting systems that

supported adaptability were developed


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We are looked upon as

Business advisors,more than just

accountants,and that has a lot to

do with the additional analysis &

the forward looking goals we aresetting..Caterpillar

1-10


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LearningLearning

ObjectiveObjective1-1-

Defining Mgt AccountingDefining Mgt Accounting


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Managerial accounting is the process of Identifying Measuring Analyzing

Interpreting Communicating information

Define Managerial Accounting


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Management Accounting Information

Management accounting provides both financialinformation and nonfinancial information

The role of management information supports

strategic (planning), operational (operating) and

control (performance evaluation) management

decision making

In short, management accounting

information is pervasive and purposeful


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Examples of management accounting

information include: The reported expense of an operating

department, such as the assembly department

of an automobile plant or an electronics

company

The costs of producing a product

The cost of delivering a service

The cost of performing an activity or businessprocess such as creating a customer invoice

The costs of serving a customer

Management Accounting

Information


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LearningLearning

ObjectiveObjective

224 fundamental processes4 fundamental processes

that help organisationsthat help organisations

attain their goalsattain their goals


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Managing Resources, Activities,

and PeopleAn organization . . .

Acquires Resources

Hires People

Organized setOrganized set

of activitiesof activities

Organized setOrganized set

of activitiesof activities

Decision

Making

Decision

Making

PlanningPlanning

DirectingDirecting

ControllingControlling


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LearningLearning

ObjectiveObjective

335 objectives of Managerial5 objectives of Managerial

accounting activityaccounting activity


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How Managerial Accounting

Adds Value to the Organization

Providing information for decision making and

planning.

Assisting managers in directing and controlling

activities. Motivating managers and other employees

towards organizations goals.

Measuring performance of activities, managers,and other employees.

Assessing the organizations competitive position.

Providing information for decision making and

planning.

Assisting managers in directing and controlling

activities. Motivating managers and other employees

towards organizations goals.

Measuring performance of activities, managers,and other employees.

Assessing the organizations competitive position.


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The Balanced Scorecard

Financial PerspectiveGoals Measures

Customer Perspective

Goals Measures

Operations Perspective

Goals Measures

Innovation Perspective

Goals Measures

How do we lookHow do we lookto owners?to owners?

How do customersHow do customers

see us?see us?

How can weHow can we

continue tocontinue to

improve?improve?

In which activitiesIn which activities

must we excel?must we excel?


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LearningLearning

ObjectiveObjective

44Difference BetweenDifference Between

Managerial and FinancialManagerial and Financial

accountingaccounting


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Managerial versus Financial

AccountingAccounting SystemAccounting System

(accumulates financial and(accumulates financial and

managerial accounting data in themanagerial accounting data in the

cost accounting system)cost accounting system)

Accounting SystemAccounting System

(accumulates financial and(accumulates financial and

managerial accounting data in themanagerial accounting data in the

cost accounting system)cost accounting system)

Managerial AccountingManagerial Accounting

Information for decisionInformation for decision

making, planning, andmaking, planning, and

controlling ancontrolling anorganizationsorganizations

operations.operations.

Managerial AccountingManagerial Accounting

Information for decisionInformation for decision

making, planning, andmaking, planning, and

controlling ancontrolling anorganizationsorganizations

operations.operations.

Financial AccountingFinancial Accounting

Published financialPublished financial

statements and otherstatements and other

financial reports.financial reports.

Financial AccountingFinancial Accounting

Published financialPublished financial

statements and otherstatements and other

financial reports.financial reports.

InternalInternal

UsersUsers

ExternalExternal

UsersUsers


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Managerial versus Financial

Accounting

Users o


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LearningLearningObjectiveObjective

55Explain where ManagementExplain where Management

accountants are located inaccountants are located in

an organisationan organisation


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A staff position supportsand assists line positions.

Example: A costaccountant in the

manufacturing plant.

A staff position supportsand assists line positions.

Example: A costaccountant in the


Line and Staff Positions

A line position is directlyinvolved in achieving the

basic objectives of an

organization.

Example: A productionsupervisor in a


A line position is directlyinvolved in achieving the

basic objectives of an

organization.

Example: A productionsupervisor in a



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66Describe the roles of theDescribe the roles of the

CFO,treasurer,controller,&CFO,treasurer,controller,&

internal auditorinternal auditor


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Divisional Controller

DC responsibilities towards his division are the same

as the CFO has for the organisation:

Supervising accounting personnel

Preparation of information and reports, managerial

and financial

Analysis of accounting information

Planning and decision making

DC responsibilities towards his division are the sameas the CFO has for the organisation:

Supervising accounting personnel

Preparation of information and reports, managerial

and financial

Analysis of accounting information

Planning and decision making


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Treasurer

Responsible for raising capital and safeguarding theorganizations assets.

Supervises relationships with financial institutions.

Work with investors and potential

investors. Manages investments.

Establishes credit policies.

Manages insurance coverage

Responsible for raising capital and safeguarding theorganizations assets.

Supervises relationships with financial institutions.

Work with investors and potential

investors. Manages investments.

Establishes credit policies.

Manages insurance coverage


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LearningLearning

ObjectiveObjective

77Major contemporary themesMajor contemporary themes

in Managerial Accountingin Managerial Accounting


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E l ti d Ad t ti i


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Evolution and Adaptation in

Managerial Accounting

Service vs.

Manufacturing Firms

Emergence of NewIndustries

Global Competition

Focus on the Customer

Cross-Functional Teams

Computer-Integrated

Manufacturing

Product Life Cycles

Time-Based

CompetitionInformation and

Communication

Technology

Just-in-Time Inventory

Total Quality Management

Continuous Improvement

ChangeChange

E-Business


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1-34

ObjectivesMeasure the cost of

resources consumed.

Identify and eliminate

non-value-added

costs.

ObjectivesMeasure the cost of

resources consumed.

Identify and eliminatenon-value-added

costs.

Cost Management Systems

Cost

Management

System


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1-35

ObjectivesDetermine efficiency

and effectiveness of

major activities. Identify and evaluate

new activities thatcan improve

performance.

ObjectivesDetermine efficiency

and effectiveness of

major activities. Identify and evaluate

new activities thatcan improve

performance.

Cost Management Systems

Cost

Management

System


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1-36

LearningLearning

ObjectiveObjective

88Strategic cost Mgt and theStrategic cost Mgt and the

Value chainValue chain


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Q TO BE ANSWERED HERE!

Q.HOW ARE THE GOODS ANDSERVICES THAT WE ALL CONSUME

CREATED?

1-37

St t i C t M t d


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1-38

ProductProduct

DesignDesign

ProductProduct

DesignDesign

ResearchResearch

andand

DevelopmentDevelopment

ResearchResearch

andand

DevelopmentDevelopment

Strategic Cost Management and

the Value Chain

Securing rawSecuring raw

materials andmaterials andother resourcesother resources

Securing rawSecuring raw

materials andmaterials andother resourcesother resources

ProductionProductionProductionProduction

MarketingMarketingMarketingMarketing

DistributionDistributionDistributionDistribution

CustomerCustomer

ServiceService

CustomerCustomer

ServiceServiceStartStart


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Strategy & ManagementAccounting

Strategy specifies how an organizationmatches its own capabilities with the

opportunities in the marketplace to accomplish

its objectives

Strategic Cost Management focusesspecifically on the cost dimension within a

firms overall strategy

2009 Pearson Prentice Hall. All rights reserved.


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Strategy & Management

Accounting Management accounting helps answer

important questions such as:

Who are our most important customers, and how do

we deliver value to them?

What substitute products exist in the marketplace,

and how do they differ from our own?

What is our critical capability?

Will we have enough cash to support our strategy orwill we need to seek additional sources?


M t A ti d


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Management Accounting and

Value

Creating value is an important part ofplanning and implementing strategy

Value is the usefulness a customer gains

from a companys product or service


M t A ti d


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Management Accounting and

Value Value Chain is the sequence of business functions

in which customer usefulness is added to productsor services

The Value-Chain consists of:

1. Research & Development2. Design

3. Production

4. Marketing

5. Distribution

6. Customer Service



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The Value Chain Illustrated



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1-45


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A Value Chain Implementation



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Key Success Factors

The dimensions of performance thatcustomers expect, and that are key to the

success of a company include:

Cost and efficiency Quality

Time

Innovation



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1-48

Theory of Constraints

A sequential process ofidentifying and removingidentifying and removing

constraintsconstraintsin a system.

Restrictions or barriers that impede

progress toward an objective

Restrictions or barriers that impede

progress toward an objective


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1-49


99Understand the ethicalUnderstand the ethical

responsibilities of aresponsibilities of a

managerial accountantmanagerial accountant


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Ethical Climate of Business

The corporate scandals experienced over the lastfew years have shown us that unethical behaviorin business is wrong in a moral sense and can be

disastrous in the economy. In addition to

Sarbanes-Oxley, there will likely be more reformsin corporate governance and accounting.

The corporate scandals experienced over the lastfew years have shown us that unethical behaviorin business is wrong in a moral sense and can be

disastrous in the economy. In addition to

Sarbanes-Oxley, there will likely be more reformsin corporate governance and accounting.


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1-51


1010ProfessionalProfessionalorganisations,certificationorganisations,certification

process & ethical stds in theprocess & ethical stds in the

field of management accountingfield of management accounting

Managerial Accounting as a


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Managerial Accounting as a

Career

Professional Organizations

Institute of Management Accountants (IMA)Institute of Management Accountants (IMA)

PublishesPublishes

Management

Accountingand researchand research

studies.studies.

PublishesPublishes

Management

Accountingand researchand research

studies.studies.

AdministersAdministers

Certified

ManagementAccountant

programprogram

AdministersAdministers

Certified

ManagementAccountant

programprogram

DevelopsDevelops

Standards of

Ethical

Conduct for

Management

Accountants

DevelopsDevelops

Standards of

Ethical

Conduct forManagement

Accountants


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Professional Ethics

CompetenceCompetence

ConfidentialityConfidentialityIntegrityIntegrity

CredibilityCredibility


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Readings

.1 P. Drucker, Be Data Literate - Know Whatto Know

J. Shank and V. Govindarajan, Strategic Cost

Management and the Value Chain Balkcom. J.E., C. Ittner, and D. Larcker, Strategic

Performance Measurement: Lessons Learned and

Future Directions, Journal of Strategic Performance

Measurement(April-May 1997), 22-32.

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Discussion Point

Consider the operations of a fast food company withhundreds of retail outlets scattered about the

country.Consider the descriptions of the mgt

accountant provided in learning objective and in the

remainder session discussion to identify mgtaccounting information needs of the following:

a)The manager of a local fast food outlet that

prepares food and serves it to customers who walk in

or pick it up at a drive through window.

b)The regional mgr who supervises the

operations of all the retail outlets in a 3 state

region 1-55


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c)senior mgt located at the companys

corporate headquarters .

Consider specifically the information needs

of the president as well as the vice

presidents of operations and marketing .Be

sure to address the content ,frequency, andlevel of aggregation of information needed

by these different mgrs.

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ma-session 1.lbsim

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