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The Accountant’s Role in the Organization

The Accountant’s Role in the Organization. Chapter 1. Learning Objective 1. Describe how cost accounting supports management accounting and financial accounting. Management Accounting. It measures and reports financial and nonfinancial information that helps

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The Accountant’s Role in the Organization

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  1. The Accountant’s Rolein the Organization Chapter 1

  2. Learning Objective 1 Describe how cost accounting supports management accounting and financial accounting.

  3. Management Accounting It measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization.

  4. 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.

  5. Cost Accounting It provides information for both management accounting and financial accounting. It measures and reports financial and nonfinancial data.

  6. 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.

  7. Learning Objective 2 Understand how management accountants affect strategic decisions.

  8. Strategic Cost Management Developing strategy Building resources and capabilities Implementing strategy

  9. Strategic Cost Management Building resources and capabilities Current Assets Long-Term Productive Assets Intangible Assets

  10. Learning Objective 3 Distinguish between the planning and control decisions of managers.

  11. Planning and Controlling Management Decision Management Accounting System Planning Budgets Feedback Accounting System Control Performance Evaluation Performance Reports

  12. Planning and Controlling What is planning? Setting goals Predicting results Deciding how to attain goals

  13. Planning and Controlling What is control? Deciding and taking actions Deciding on performance evaluation and feedback

  14. 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.

  15. Planning and Controlling What are performance reports? These are reports that compare actual results with budgeted amounts.

  16. Performance Report Example Boone Shop, July 2003 BudgetActualVariance 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

  17. 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

  18. Feedback This involves managers examining past performance and systematically exploring alternative ways to make better informed decisions in the future.

  19. Learning Objective 4 Distinguish among the problem- solving, scorekeeping, and attention-directing roles of management accountants.

  20. Problem Solving This involves comparative analysis for decision making. This role asks: Of the several alternatives available, which is the best?

  21. Scorekeeping This involves accumulating data and reporting reliable results to all levels of management. This role asks: How is the business doing?

  22. 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.

  23. Learning Objective 5 Identify four themes managers need to consider for attaining success.

  24. 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

  25. 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.

  26. 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.

  27. 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.

  28. 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.

  29. 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.

  30. Continuous Improvementand Benchmarking Continuous improvement by competitors creates a never-ending search for higher levels of performance within many organizations.

  31. Learning Objective 6 Describe the set of business functions in the value chain.

  32. 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.

  33. Value Chain Management accountants provide decision support for managers in the following six business functions:

  34. Value Chain R & D Design Production Management Accounting Marketing Distribution Service

  35. 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.

  36. Value Chain Functions Design It is the detailed planning and engineering of products, services, or processes.

  37. Value Chain Functions Production It is the acquisition, coordination, and assembly of resources to produce a product or deliver a service.

  38. Value Chain Functions Marketing It is the manner by which companies promote and sell their products or services to customers or prospective customers.

  39. Value Chain Functions Distribution It is the delivery of products or services to the customer.

  40. Value Chain Functions Service It is the after-sale support activities provided to customers.

  41. Learning Objective 7 Describe three ways management accountants support managers.

  42. Key Guidelines 1. Cost-benefit approach 2. Full recognition of behavioral as well as technical considerations 3. Using different costs for different purposes

  43. 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.

  44. 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

  45. 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.

  46. Learning Objective 8 Understand how cost management accounting fits into an organization’s structure.

  47. 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.

  48. Line and Staff Relationships

  49. Line and Staff Relationships

  50. Learning Objective 9 Understand what professional ethics mean to management accountants.

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