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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]
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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
manufacturing plant.
Line and Staff Positions
A line position is directlyinvolved in achieving the
basic objectives of an
organization.
Example: A productionsupervisor in a
manufacturing plant.
A line position is directlyinvolved in achieving the
basic objectives of an
organization.
Example: A productionsupervisor in a
manufacturing plant.
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LearningLearningObjectiveObjective
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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1-29
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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1-31
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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1-33
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?
2009 Pearson Prentice Hall. All rights reserved.
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
2009 Pearson Prentice Hall. All rights reserved.
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
2009 Pearson Prentice Hall. All rights reserved.
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The Value Chain Illustrated
2009 Pearson Prentice Hall. All rights reserved.
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1-44
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1-45
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A Value Chain Implementation
2009 Pearson Prentice Hall. All rights reserved.
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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
2009 Pearson Prentice Hall. All rights reserved.
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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
LearningLearningObjectiveObjective
99Understand the ethicalUnderstand the ethical
responsibilities of aresponsibilities of a
managerial accountantmanagerial accountant
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1-50
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
LearningLearningObjectiveObjective
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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1-52
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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1-53
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.
1-54
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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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