Introduction of Cost & Management Accounting.ppt
- 1. Managerial Accounting and The Business Environment Prepared & Edited by Nazim Uddin Assistant Professor National Institute of Textile Engineering & Research
- 3. Accounting Provides information to external parties Stockholders, creditors, regulators Estimates the cost of products produced and services provided Provides information to internal decision makers To plan, control, and evaluate performance
- 4. Types of Accounting Financial Accounting Meets external information needs Complies with GAAP Management Accounting Meets internal information needs Provides product costing information Cost Accounting Provides information for both management accounting and financial accounting Measures and reports financial and nonfinancial information relating to the cost of acquiring or utilizing resources in an organization Includes those parts of both management accounting & financial accounting in which cost information is collected and analyzed
- 5. Managerial Accounting, Cost Accounting and Financial Accounting Managerial Accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial Accounting measures and records business transactions and prepares and provides financial statements to external parties. Cost Accounting measures and reports financial and nonfinancial information to managers relating to the cost of acquiring or utilizing resources in an organization.
- 6. Relationship of Financial, Management, and Cost Accounting FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING COST ACCOUNTING
- 7. Managerial Accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Managers use management accounting information to choose, communicate, and implement strategy. They also use management accounting information to coordinate product design, production, and marketing decisions. Management accounting focuses on internal reporting. MANAGERIAL ACCOUNTING
- 8. Activities Include: Explaining manufacturing and nonmanufacturing costs and how they are reported in the financial statements Computing the cost of providing a service or manufacturing a product Determining the behavior of costs and expenses as activity levels change Analyzing cost-volume profit relationships within a company MANAGERIAL ACCOUNTING
- 9. Activities Include (continued): Assisting management in profit planning and budgeting Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs Accumulating and presenting relevant data for management decision making MANAGERIAL ACCOUNTING
- 10. Comparison of Financial and Managerial Accounting Financial Managerial Accounting Accounting 1. Users Reports to those outside Reports to those inside the organization the organization 2. Time focus Emphasis on past activities Emphasis on future decisions 3. Verifiability Emphasis on Emphasis on versus relevance objectivity and verifiability relevance 4. Precision versus Emphasis on Emphasis on timeliness precision timeliness 5. Subject Summarized data for Detailed data by the entire organization segments of an organization 6. Requirements Must follow Need not follow GAAP GAAP Mandatory Not mandatory 1. Users 2. Time Focus 3. Verifiability vs. Relevance 4. Precision vs. Timeliness 5. Subject 6. Requirement
- 11. Work of Management Planning Controlling Directing and Motivating
- 12. The Changing Business Environment A more competitive environment emphasizing: Global competition Lower prices and costs Higher quality products More product choices Business environment changes in the past twenty years
- 13. The Changing Business Environment Just-In-Time Total Quality Management Process Reengineering Theory of Constraints New tools for managers!
- 14. Just-in-Time (JIT) Systems Receive customer orders. Schedule production. Receive materials just in time for production. Complete parts just in time for assembly into products. Complete products just in time to ship customers.
- 15. More rapid response to customer orders Less warehouse space needed Reduced inventory costs Greater customer satisfaction Just-in-Time (JIT) Higher quality products Zero defects
- 16. Do we need to change the plan? Where are we? Where do we want to go? How do we start? How are we doing? Check Plan Act Do is Total Quality Management (TQM) Benchmarking Continuous Improvement
- 17. Process Reengineering A business process is diagrammed in detail. The process is redesigned to include only those steps that make our product more valuable. Every step in the business process must be justified.
- 18. Process Reengineering A business process is diagrammed in detail. The process is redesigned to include only those steps that make our product more valuable. Every step in the business process must be justified. Anticipated results: Process is simplified. Process is completed in less time. Costs are reduced. Opportunities for errors are reduced.
- 19. Theory of Constraints (TOC) A sequential process of identifying and removing constraints in a system. Restrictions or barriers that impede progress toward an objective
- 20. Corporate Organization Chart Purchasing Personnel Vice President Operations Treasurer Controller Chief Financial Officer President Board of Directors Organizational Structure An organization is a group of people united for a common purpose.
- 21. Decentralization Delegation of decision-making authority throughout an organization. Corporate Organization Chart Purchasing Personnel Vice President Operations Treasurer Controller Chief Financial Officer President Board of Directors
- 22. Line and Staff Relationships Line positions are directly related to achievement of the basic objectives of an organization. Example: Production supervisors in a manufacturing plant. Staff positions support and assist line positions. Example: Cost accountants in the manufacturing plant.
- 23. The Chief Financial Officer (CFO) The CFO is: A member of top management. Responsible for providing timely and relevant data for planning and control activities. Responsible for external financial reporting.
- 24. Questions