Managerial Accounting and the Business

Environment
Managerial accounting provides information to managers of an organization who
direct and control its operations. It is the process of identifying, measuring, analyzing, interpreting
and communicating information in pursuit of an organization’s goals.

Financial accounting provides information to stockholders, creditors, and others

who are outside the organization.

Work of a management includes

Decision making
Planning
Directing and Motivating
Controlling
Planning and Control Cycle
Formulating long- and Begin
short-term plans
(Planning)

Comparing actual to Implementing

planned performance Decision plans (Directing and
(Controlling) Making Motivating)

Measuring
performance
(Controlling)
Comparison of Financial and Managerial Accounting
 Organizational Structure
An
Anorganization
organizationisisaagroup
groupof
ofpeople
people
united
unitedfor
foraacommon
commonpurpose.
purpose.

C o rp o rate O rg an izatio n C h art

B o a rd o f D ire c to rs

P re sid e nt

P urc ha sing P e rso nne l V ic e P re sid e nt C hie f F ina nc ia l

O p e ra tio ns O f fic e r

T re a sure r C o ntro lle r

 Objectives of Managerial Accounting
• Providing information for planning and decision making.
• Assisting managers in directing and controlling operational activities.
• Motivating managers and employees towards organizational goals.
• Measuring performance of activities, units and employees within organization.
• Assessing the organizations competitive position
 Decentralization
Decentralization
Decentralizationisisthe
thedelegation
delegationof
ofdecision-
decision-
making
makingauthority
authoritythroughout
throughoutananorganization.
organization.

Corporate O rganization Chart

De
t ion ce
liza ng B oa rd of D irectors de n
cis trali
n tra aki ion za
e ce n–m –m tion
D s io P resident ak
ci ing
de
P urcha sing P ersonnel V ice P resident C hief Fina ncia l
O pera tions O fficer

T rea surer C ontroller

 Organization Chart
The Controller: CFO or Controller in many organizations, is responsible for all
accounting and finance functions. He has the responsibility of:
• Financial planning and analysis.
• Cost control.
• Financial reporting.
• Accounting information systems.

Treasurer: Is typically responsible for raising capital and safeguarding the

organization’s assets.

Internal Auditor: Is responsible for reviewing the accounting procedure and

reports.
Managerial Accounting and Value chain
A value chain is a series of consecutive steps that go into the creation of a finished
product, from its initial design to its arrival at a customer's door. A company
conducts a value-chain analysis by evaluating the detailed procedures involved in
each step of its business. The purpose of a value-chain analysis is to increase
production efficiency so that a company can deliver maximum value for the least
possible cost. There are many business processes that add usefulness for the end
user. Managerial accounting is a component in many of these processes. Each
department must communicate with the others in the value chain.
 Cost Management System
To help managers cope with this high- pressure environment, many companies have
moved away from historical cost accounting perspective towards a cost
management perspective. A cost management system is a management planning
and control system which:
• Measures the cost of resources consumed by activities.
• Identify and eliminate non-value added costs
• Determine efficiency and effectiveness of all major activities.
• Identify and evaluate new activities that can improve future performance of the
organization.
 The Changing Business Environment
A more competitive environment emphasizing:

• Higher quality products

• Lower prices and costs
• Global competition
• Meeting and anticipating customer needs

New tools for managers!

• Just-In-Time
• Total Quality Management
• Process Reengineering
• Theory of Constraints