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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