How to Study Accounting

Successfully

Your Goals in Studying the

course
Skill Set Required to be Successful
in Business world are:

SKILL SET

Technical / Analytical Communication

Skills Skills

Personal/Self Interpersonal
Skills Skills
 Teaching Learning Cycle

Meaning and Objectives

ation
PreviewPreview
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Assign
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Learning Objectives
Demons

Present
and oth

Read
Test

Teaching/
Learning
Recall &

Cycle
tion

Re in
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Examina

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Ch
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R ev ssig
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Teaching Cycle
 MY INSTRUCTIONS TO THE
STUDENTS
• Read and understand the learning
objectives 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!
 Learning Aids

 Textbook
 Corporate Insights and Decision
Points
 Power-point inputs lecture
 Review and reinforcement through
readings
 Presentations and reports
 Evaluation Scheme

• Quiz & assignment -20%

• Continuous Evaluation-20%
(Case study presentation,group discussion,Reflective
Notes,Class Participation).Students should have
atleast 75% attendance to be evaluated on this
component.
• End term Exam-60%
MANAGEMENT
ACCOUNTING

Learning Facilitator
Dr. Kanwal Anil
Associate Professor (Finance),
Email: kanwal.anil@iilm.edu
1 Chapter
One
The Changing Role of
Managerial Accounting in a
Dynamic Business
Environment

1-8
 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 and
change to environmental changes became
important, management accounting systems that
supported adaptability were developed
 “………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 are
setting”..Caterpillar

1-10
 Learning
Objective
1-
Defining Mgt Accounting

1-11
Define Managerial Accounting

Managerial accounting is the process of

 Identifying
 Measuring
 Analyzing
 Interpreting
 Communicating information

1-12
 Management Accounting
Information
• The institute of Management Accountants
has defined management accounting as:
– A value-adding continuous improvement
process of planning, designing, measuring
and operating both nonfinancial information
systems and financial information systems
that guides management action, motivates
behavior, and supports and creates the
cultural values necessary to achieve an
organization’s strategic, tactical and
operating objectives
 Management Accounting Information
– Management accounting provides both financial
information 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
 Management Accounting
• Examples ofInformation
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 business
process – such as creating a customer invoice
– The costs of serving a customer
 Learning
Objective
2
4 fundamental processes
that help organisations
attain their goals

1-16
 Managing Resources, Activities,
and People
An organization . . .
Directing

Acquires Resources Decision

Organized
Organized setset Making
of
of activities
activities

Controlling Planning
Hires People

1-17
 Learning
Objective
3
5 objectives of Managerial
accounting activity

1-18
 How Managerial Accounting
Adds Value to the Organization
•• Providing
Providing information
information for
for decision
decision making
making and
and
planning.
planning.
•• Assisting
Assisting managers
managers in
in directing
directing and
and controlling
controlling
activities.
activities.
•• Motivating
Motivating managers
managers and
and other
other employees
employees
towards
towards organization’s
organization’s goals.
goals.
•• Measuring
Measuring performance
performance ofof activities,
activities, managers,
managers,
and
and other
other employees.
employees.
•• Assessing
Assessing thethe organization’s
organization’s competitive
competitive position.
position.

1-19
 The Balanced Scorecard
How do we look Financial Perspective
to owner’s? Goals Measures

In which activities
must we excel?

Customer Perspective Operations Perspective

Goals Measures Goals Measures
How do customers
see us?

Innovation Perspective How can we

continue to
Goals Measures improve?

1-20
 Learning
Objective
4
Difference Between
Managerial and Financial
accounting

1-21
 Managerial versus Financial
Accounting
Accounting
Accounting System
System
(accumulates
(accumulates financial
financial and
and
managerial
managerial accounting
accounting data
data in
in the
the
cost
cost accounting
accounting system)
system)

Managerial
Managerial Accounting
Accounting Financial
Financial Accounting
Accounting
Information
Information for
for decision
decision Published
Published financial
financial
making,
making, planning,
planning, and
and statements
statements andand other
other
controlling
controlling an
an financial
financial reports.
reports.
organization’s
organization’s
operations.
operations.
Internal External
Users Users
1-22
Managerial versus Financial
Accounting

Users of
R 1-23
 Learning
Objective
5
Explain where Management
accountants are located in
an organisation

1-24
 Line and Staff Positions
•• AA line
line position
position is
is directly
directly •• AA staff
staff position
position supports
supports
involved
involved inin achieving
achieving thethe and
and assists
assists line
line positions.
positions.
basic
basic objectives
objectives ofof an
an –– Example:
Example: AA costcost
organization.
organization. accountant
accountant in in the
the
manufacturing
manufacturing plant.
plant.
–– Example:
Example: AA production
production
supervisor
supervisor in
in aa
manufacturing
manufacturing plant.
plant.

1-25
 Learning
Objective
6
Describe the roles of the
CFO,treasurer,controller,&
internal auditor

1-26
 THE CFO
• Designation given to the top managerial and
financial accountant
• Integral member of the mgt team
• Providing strategic information to BODsand
top line mgrs.
• Former accountants have served top
executives in Cos like GE,General
motors,Singer etc.

1-27
 Divisional Controller
DC
DC responsibilities
responsibilities towards
towards his
his division
division are
are the
the same
same
as
as the
the CFO
CFO has
has for
for the
the organisation:
organisation:
–– Supervising
Supervising accounting
accounting personnel
personnel
–– Preparation
Preparation ofof information
information and
and reports,
reports, managerial
managerial
and
and financial
financial
–– Analysis
Analysis of
of accounting
accounting information
information
–– Planning
Planning and
and decision
decision making
making

1-28
 Treasurer
Responsible
Responsible for for raising
raising capital
capital and
and safeguarding
safeguarding the the
organization’s
organization’s assets.
assets.
–– Supervises
Supervises relationships
relationships with
with financial
financial institutions.
institutions.
–– Work
Work with
with investors
investors and
and potential
potential
investors.
investors.
–– Manages
Manages investments.
investments.
–– Establishes
Establishes credit
credit policies.
policies.
–– Manages
Manages insurance
insurance coverage
coverage

1-29
 Internal Auditor
Responsible
Responsible forfor reviewing
reviewing accounting
accounting procedures,
procedures,
records,
records, and
and reports
reports in in both
both the
the controller’s
controller’s and
and the
the
treasurer’s
treasurer’s area
area ofof responsibility.
responsibility.
–– Expresses
Expresses an an opinion
opinion toto top
top
management
management regarding
regarding thethe
effectiveness
effectiveness of of the
the
organizations
organizations accounting
accounting
system.
system.

1-30
 Learning
Objective
7
Major contemporary themes
in Managerial Accounting

1-31
 Major Themes in Managerial
Accounting
Behavioral
Behavioral Costs
Costs and
and
Issues
Issues Benefits
Benefits

Information
Information Evolution
Evolution and
and
and
and Incentives
Incentives Adaptation
Adaptation

Managerial
Accounting
1-32
 Evolution and Adaptation in
Managerial Accounting
E-Business
Service vs. Product Life Cycles
Manufacturing Firms
Time-Based
Competition
Emergence of New
Industries Change Information and
Communication
Global Competition Technology

Focus on the Customer Just-in-Time Inventory

Cross-Functional Teams Total Quality Management

Computer-Integrated Continuous Improvement

Manufacturing 1-33
 Cost Management Systems
Objectives
Objectives
➊Measure
➊ Measure the
the cost
cost of
of
resources
resources consumed.
consumed.
➋Identify
➋ Identify and
and eliminate
eliminate
non-value-added
non-value-added Cost
costs.
costs. Management
System

1-34
 Cost Management Systems
Objectives
Objectives
❸Determine
❸ Determine efficiency
efficiency
and
and effectiveness
effectiveness of of
major
major activities.
activities.
❹Identify
❹ Identify and
and evaluate
evaluate
new
new activities
activities that
that Cost
Management
can
can improve
improve System
performance.
performance.

1-35
 Learning
Objective
8
Strategic cost Mgt and the
Value chain

1-36
 Q TO BE ANSWERED HERE!
• Q.HOW ARE THE GOODS AND
SERVICES THAT WE ALL CONSUME
CREATED?

1-37
 Strategic Cost Management and
the Value Chain
Product
Product
Design
Design
Production
Production
Research
Research
and
and
Development
Development Marketing
Marketing
Securing
Securing raw
raw
materials
materials and
and Distribution
Distribution
other
other resources
resources
Customer
Customer
Start Service
Service

1-38
 Strategy & Management
Accounting
• Strategy – specifies how an organization
matches its own capabilities with the
opportunities in the marketplace to accomplish
its objectives
• Strategic Cost Management – focuses
specifically on the cost dimension within a
firm’s overall strategy
© 2009 Pearson Prentice Hall. All rights reserved.
 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 or
will we need to seek additional sources?

© 2009 Pearson Prentice Hall. All rights reserved.

 Management Accounting and
Value
• Creating value is an important part of
planning and implementing strategy
• Value is the usefulness a customer gains
from a company’s product or service

© 2009 Pearson Prentice Hall. All rights reserved.

 Management Accounting and
Value
• Value Chain is the sequence of business functions
in which customer usefulness is added to products
or services
• The Value-Chain consists of:
1. Research & Development
2. Design
3. Production
4. Marketing
5. Distribution
6. Customer Service

© 2009 Pearson Prentice Hall. All rights reserved.

The Value Chain Illustrated

© 2009 Pearson Prentice Hall. All rights reserved.

1-44
1-45
A Value Chain Implementation

© 2009 Pearson Prentice Hall. All rights reserved.

 Key Success Factors
• The dimensions of performance that
customers expect, and that are key to the
success of a company include:
– Cost and efficiency
– Quality
– Time
– Innovation

© 2009 Pearson Prentice Hall. All rights reserved.

 Theory of Constraints
A sequential process of identifying and removing
constraints in a system.

Restrictions
Restrictions or
or barriers
barriers that
that impede
impede
progress
progress toward
toward anan objective
objective

1-48
 Learning
Objective
9
Understand the ethical
responsibilities of a
managerial accountant

1-49
 Ethical Climate of Business
The
The corporate
corporate scandals
scandals experienced
experienced overover the
the last
last
few
few years
years have
have shown
shown us that unethical
us that nethical behavior
behavior
in
in business
business is
is wrong
wrong in
in aa moral
moral sense
sense and
and can
can be
be
disastrous
disastrous in
in the
the economy.
economy. In In addition
addition to
to
Sarbanes-Oxley,
Sarbanes-Oxley, there
there will
will likely
likely be
be more
more reforms
reforms
in
in corporate
corporate governance
governance and and accounting.
accounting.

1-50
 Learning
Objective
10
Professional
organisations,certification
process & ethical stds in the
field of management accounting

1-51
 Managerial Accounting as a
Career
Professional Organizations
Institute of Management Accountants (IMA)

Develops
Develops
Publishes
Publishes Administers
Administers Standards
Standards of of
Management
Management Certified
Certified Ethical
Ethical
Accounting
Accounting Management
Management Conduct
Conduct for
for
and
and research
research Accountant
Accountant Management
Management
studies.
studies. program
program Accountants
Accountants

1-52
Professional Ethics

✔Competence
✔Confidentiality
✔Integrity
✔Credibility

1-53
 Readings
• .1 P. Drucker, Be Data Literate - Know What
to 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.

1-54
 Discussion Point
• Consider the operations of a fast food company with
hundreds 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 mgt
accounting 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
• c)senior mgt located at the company’s
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, and
level of aggregation of information needed
by these different mgrs.
•

1-56
End of Chapter 1

1-57