CHAPTER 1: MANAGERIAL ACCOUNTING AND THE BUSINESS ENVIRONMENT

Managerial accounting
- concerned with determining and developing internal accounting information as a tool for helping managers make
business decisions that satisfy customers while continuously monitoring costs and improving efficiencies
- concerned with providing information to managers
- provides data that help organizations run more efficiently

The Work of Managers and Their Need for Managerial Accounting

3 Major Activities Performed by Managers
planning
o selecting a course of action and specifying how the action will be implemented
o management plans formally expressed in budgets prepared under the direction of the controller
directing and motivating
o mobilizing people to carry out plans and run routine operations
o managerial accounting data (i.e. sales reports) used in daily decision making
controlling
o ensuring that the plan is actually carried out and is appropriately modified as circumstances change
o key to effective control is feedback signals whether operations are on track
performance report compares budgeted to actual results
strategy
- game plan that enables a company to attract and retain customers by distinguishing itself from competitors
- focal point should be companys target customers
- company can only succeed if it creates a reason for customers to choose it over a competitor customer value
propositions
Categories of Customer Value Propositions
customer intimacy
o customer is king
operational excellence
o we do things better at a low cost
product leadership
o we have the best products

Comparison of Financial and Managerial Accounting

Accounting
Recording
Estimating
Organizing
Summarizing

Financial Accounting
Reports to those outside the organization:
o Owners
o Creditors
o Tax authorities
o Regulators
Emphasizes financial consequences of past activities
Emphasizes objectivity and verifiability
Emphasizes precision
Emphasizes summary data concerning entire org.
Must follow GAAP
Mandatory for external reports

Financial and
Operational Data

Managerial Accounting
Reports to those inside the organization for:
o Planning
o Directing and Motivating
o Controlling
o Performance Evaluation
Emphasizes decisions affecting the future
Emphasizes relevance
Emphasizes timeliness
Emphasizes detailed business segment reports
Need not follow GAAP
Not mandatory

Organizational Structure
Decentralization
- delegation of decision making throughout an organization by providing managers at various operating levels with
the authority to make key decisions relating to their areas of responsibility
organization chart
- shows how responsibility has been divided among managers and to show formal lines of reporting and
communication chain of command
line position
- directly involved in achieving the basic objectives of the organization
staff position
- support or provide assistance to line positions or other parts of the organization
controller
- manager in charge of the Accounting department; reports to CFO
- responsible for technical details of accounting and finance, provides leadership to professionals in his/her
department, and analyzes new and evolving situations
chief financial officer (CFO)
- responsible for providing relevant and timely data to support planning and control activities and of preparing
financial statements for external users

Professional Ethics
Code of ethics
competence
o professional exams, CE
confidentiality
o essential due to nature of information accountants analyze
integrity
o avoiding conflicts with employers and clients
o communicating the limits of professional competence
o not accepting favours that would compromise judgment
objectivity
o must be present in communications so recipients can receive both favourable and unfavourable info
corporate governance
- system by which a company is directed and controlled
corporate social responsibility (CSR)
- concept whereby organizations consider the needs of all stakeholders when making decisions

Process Management
Business process
- series of steps that are followed in order to carry out some task in a business
value chain
- consists of major business functions that add value to a companys products and services
Approaches to Managing and Improving Business Processes
1. Lean Production
2. Six Sigma
3. Enterprise Systems
4. Risk Management

Lean Production
Lean Thinking Model
o five-step management approach that organizes resources such as peoples and machines around the flow
of business processes and that pulls units through these processes in response to customer orders
o results in lower inventories, fewer defects, less wasted effort, and quicker customer response times
just-in-time production (JIT)
supply chain management
o coordination of business processes across companies to better serve end customers
Six Sigma
- process of improvement method that relies on customer feedback and fact-based data gathering and analysis
techniques to drive process improvement
- DMAIC (define, measure, analyze, improve, control)
Enterprise Systems
- designed to overcome communication problems by integrating data across an organization into a single software
system that enables all employees to have simultaneous access to a common set of data
Enterprise Risk Management
- process used by a company to proactively identify and manage risks
- most common tactic reduce risks by implementing specific controls