Chapter 1

The Accountant’s Role in the

Organization

Copyright © 2003 Pearson Education Canada Inc. Slide 1-1

Management Accounting

• Management accounting measures and reports

financial and non-financial information that helps
managers make decisions to fulfill the goals of an
organization
• Managers use management accounting information to
• choose, communicate and implement strategy
• coordinate product design, production and
marketing decisions
• Management accounting focuses on internal reporting
• Management accounting is future oriented

Copyright © 2003 Pearson Education Canada Inc. Pages 2-3 Slide 1-2
Financial Accounting

• Financial accounting measures and records business

transactions and provides financial statements that
are based on generally accepted accounting
principles (GAAP)
• Managers are responsible for the financial statements
issued to investors, government regulators, and other
parties outside the organization
• Financial accounting focuses on external parties
• Financial accounting reports on what happened in the
past

Copyright © 2003 Pearson Education Canada Inc. Pages 2-3 Slide 1-3
Cost Accounting and Cost Management

• Cost accounting measures and reports information

relating to the cost of acquiring and utilizing
resources
• Cost accounting provides information for
management and financial accounting
• Cost management describes the approaches and
activities of managers in short-run and long-run
planning and control decisions
• These decisions increase value of customers and
lower costs of products and services
• Cost management is an integral part of a company’s
strategy
Copyright © 2003 Pearson Education Canada Inc. Pages 3-4 Slide 1-4
Management Accountants and Strategy

• Strategy specifies how an organization matches its

own capabilities with opportunities in the marketplace
to accomplish its objectives
• Strategy examples
• Quality products or services at low prices (WestJet)
• Unique products or services at higher prices
(Clublink)
• Management accountants provide information to
management such as
• Who are our customers and suppliers
• Sensitivity of market to price, quality and service
• Industry characteristics (size, growth)
Copyright © 2003 Pearson Education Canada Inc. Pages 4-6 Slide 1-5
 Planning and Control
Management Management
Decisions Accounting System

PLANNING Budgets Financial

• increase advertising • pages sold, rates per representation
rates page, revenue of plans
Feedback

CONTROL
Action Accounting System Recording
• implement rate • invoices / receipts transactions
increase recorded in ledger in accounts

Performance Performance
Evaluation Reports Comparing
• comparison of actual • pages sold, rate per budgeted and
and budgeted revenues page, revenue actual results

Copyright © 2003 Pearson Education Canada Inc. Pages 6-8 Slide 1-6
Key Management Accounting Guidelines

Cost-Benefit Approach
• spend resources if they promote decision making
that better attains the organization’s goals in relation
to the cost of these resources
Behavioural and Technical Considerations
• systems are not confined exclusively to technical
matters
• always consider the influences of human activity

Different Costs for Different Purposes

• define”cost” depending on the situation under
consideration

Copyright © 2003 Pearson Education Canada Inc. Pages 8 - 9 Slide 1-7

Line and Staff Relationships

• Line management is directly responsible for attaining

the objectives of the organization
• manager in a manufacturing division

• Staff management exists to provide advice and

assistance to line management
• management accountant

• Chief financial officer (CFO) oversees

• Controllership, Treasury, Tax, and Internal
Audit functions in the organization

Copyright © 2003 Pearson Education Canada Inc. Pages 9 - 10 Slide 1-8

Functions of Management Accounting
• Management accountants perform three functions

Scorekeeping
• accumulate data and report reliable results to all
levels of management

Attention-directing
• make visible opportunities and problems on which
managers need to focus

Problem-solving
• conduct comparative analysis to identify the best
alternatives in relation to the organization’s goals

Copyright © 2003 Pearson Education Canada Inc. Page 11 Slide 1-9

Four Themes of Value Enhancement

1. Customer Focus
• attract and retain profitable customers

2. Value-chain and supply-chain analysis

• manage these critical functions

3. Key success factors (KSFs)

• keep attention focused on critical factors relative
to our competitors

4. Continuous improvement and benchmarking

• never-ending search for higher levels of
performance
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Key Themes in Management Decision Making

Customer
Focus

Value-Chain Key Success Factors Continuous

and • Cost and Efficiency Improvement
Supply-Chain • Quality And
Analysis • Time Benchmarking
• Innovation

Copyright © 2003 Pearson Education Canada Inc. Page 13 Slide 1-11

The Value Chain
• Sequence of business functions in which utility
(usefulness) is added to the products or services of an
organization
• Management accounting helps managers to administer
each of these business functions

Product,
Research Customer
Service
and Production Marketing Distribution Service
Process
Development
Design

Management Accounting
Copyright © 2003 Pearson Education Canada Inc. Page 14 Slide 1-12
E-Business Value Matrix

Business
High Operational Breakthrough
Criticality
Excellence Strategies
(Importance
of the
application to New Rational
the success Low Fundamentals Experimentation
of the
business) Low High

Practice Innovation
(Creating new markets or new
ways of doing business)

Copyright © 2003 Pearson Education Canada Inc. Page 16 Slide 1-13

Ethical Guidelines

• Professional accounting organizations play an

important role in promoting high standards of ethics in
the accounting profession

• Code of Professional Ethics

• Society of Management Accountants of Canada (SMAC)
• Act in a responsible manner
• Maintain independence
• Maintain confidentiality of information
• Serve with courtesy and good faith
• Maintain standards of competence

Copyright © 2003 Pearson Education Canada Inc. Pages 15 - 20 Slide 1-14