Technology and the Management Accountant As you have read this introductory chapter to management accounting, you have likely noticed that the goals of management accounting information provided to the management and executive teams inside the organization are quite different from the financial accounting information provided to groups outside the organization, such as investors, creditors, and regulators. You may even ask how information and performance measures regarding quality and time can be provided by a typical general ledger system that is limited to debits and credits of dollar amounts. This is a good question! For most of the twentieth century, management accountants have been able to successfully produce management accounting information using the general ledger system of financial accounting. This marriage of management accounting and financial accounting information systems worked as long as the goal of management accounting was strictly to track cost information. Now, however, the emergence of JIT, coupled with increased competition in a worldwide market, has forced most organizations to compete on issues of quality and timeliness, as well as cost. The problem is that it is very difficult to use a debit/credit system to track organizational performance regarding quality and time. Thankfully, computerized information systems, specifically database systems, have progressed to a point where it is economically feasible for organizations to track just about any kind of information. Now the real challenge for current and future management accountants is to organize the immense amount of data that can be provided to support decision making without creating information overload in managers and executives. In this process, management accountants should understand how to use the most current technology. Typically, developing knowledge and skills in computer technologies will require additional courses of study for the future business professional. The goal of the remainder of this book is to provide you with a framework for developing cost, quality, and time-based information that supports the management process. This framework must then be used with top-notch technology in order to provide information that truly adds competitive value to organizations! Looking Forward in the Management Accounting Profession Business professionals involved in management accounting have come a long way since the early days of management accounting in the 1800s. Today, management accounting professionals play a key role in many organizations. The nature of their work continues to expand as new industries develop and computer technology grows in importance in the gathering and use of information by decision makers. For example, you’ve spent the bulk of this chapter being introduced to management accounting in the context of DuPont, a manufacturing business. However, businesses focused on service rather than manufacturing (e.g., law firms, banks, hospitals, transportation, hotels) are far and away the dominant industries in the U.S. economy. Further, merchandising companies (retailers and wholesalers) combine to be as strong an economic force as the manufacturing industry. And as you’re certainly aware, the explosion of the Internet has established a new aspect in our economy—e-commerce. At this point, e-commerce is generally a growing delivery platform for many service and merchandising companies, rather than a separate industry. You need to be aware of these trends as you work through this textbook. We will spend a lot of time applying concepts and tools of management accounting to nonmanufacturing settings. As we close this chapter, we want to leave you with two lingering, but important, questions. First, can a service or merchandising company effectively perform C-V-P analysis, product costing, and segment analysis? Or are these techniques useful only for manufacturing companies? Second, does the arrival of e-commerce in service, merchandising, or manufacturing organizations change your response to the first question? That is, as companies shift more and more of their operations (such as sales of software, financial services, and groceries) into the “virtual environment” of the Internet, does e-commerce affect the use of any management accounting techniques that you are studying in this textbook? Think about these questions. We plan to spend a lot of time in the next several chapters exploring some possible answers with you. FYI By 2004, e-commerce activities across the world will be enormous, amounting to $6.8 trillion, or 8.6% of the global sales of all goods and services. Interestingly, while the United States accounted for 75% of worldwide e-commerce sales in 2000, that share is expected to drop to a little less than 50% by 2004. Source: “Global eCommerce Approaches Hypergrowth,” Forrester Research, Inc., April 18, 2000 TO SUMMARIZE Management accounting plays a key role in organizations today. The top accountant in most organizations is the controller. All accounting functions report to this individual, including the cost accountants, the financial and tax accountants, the internal auditors, and systems support personnel. Though much management accounting originates within these positions, all decision makers in the organization must understand how to create and use good management accounting information. Management accounting is also being significantly affected by dramatic improvements in computer technology. Today’s technology allows management to track performance information that goes beyond the cost-based information of

Technology and the Management Accountant

As you have read this introductory chapter to management accounting, you have likely noticed that the goals of management accounting information provided to the management and executive teams inside the organization are quite different from the financial accounting information provided to groups outside the organization, such as investors, creditors, and regulators. You may even ask how information and performance measures regarding quality and time can be provided by a typical general ledger system that is limited to debits and credits of dollar amounts. This is a good question! For most of the twentieth century, management accountants have been able to successfully produce management accounting information using the general ledger system of financial accounting. This marriage of management accounting and financial accounting information systems worked as long as the goal of management accounting was strictly to track cost information. Now, however, the emergence of JIT, coupled with increased competition in a worldwide market, has forced most organizations to compete on issues of quality and timeliness, as well as cost. The problem is that it is very difficult to use a debit/credit system to track organizational performance regarding quality and time. Thankfully, computerized information systems, specifically database systems, have progressed to a point where it is economically feasible for organizations to track just about any kind of information. Now the real challenge for current and future management accountants is to organize the immense amount of data that can be provided to support decision making without creating information overload in managers and executives. In this process, management accountants should understand how to use the most current technology. Typically, developing knowledge and skills in computer technologies will require additional courses of study for the future business professional. The goal of the remainder of this book is to provide you with a framework for developing cost, quality, and time-based information that supports the management process. This framework must then be used with top-notch technology in order to provide information that truly adds competitive value to organizations!

Looking Forward in the Management Accounting Profession

Business professionals involved in management accounting have come a long way since the early days of management accounting in the 1800s. Today, management accounting professionals play a key role in many organizations. The nature of their work continues to expand as new industries develop and computer technology grows in importance in the gathering and use of information by decision makers.  For example, you’ve spent the bulk of this chapter being introduced to management accounting in the context of DuPont, a manufacturing business.  However, businesses focused on service rather than manufacturing (e.g., law firms, banks, hospitals, transportation, hotels) are far and away the dominant industries in the U.S. economy.   Further, merchandising companies (retailers and wholesalers) combine to be as strong an economic force as the manufacturing industry.  And as you’re certainly aware, the explosion of the Internet has established a new aspect in our economy—e-commerce.  At this point, e-commerce is generally a growing delivery platform for many service and merchandising companies, rather than a separate industry.  You need to be aware of these trends as you work through this textbook.  We will spend a lot of time applying concepts and tools of management accounting to nonmanufacturing settings.  As we close this chapter, we want to leave you with two lingering, but important, questions.  First, can a service or merchandising company effectively perform C-V-P analysis, product costing, and segment analysis? Or are these techniques useful only for manufacturing companies?  Second, does the arrival of e-commerce in service, merchandising, or manufacturing organizations change your response to the first question?  That is, as companies shift more and more of their operations (such as sales of software, financial services, and groceries) into the “virtual environment” of the Internet, does e-commerce affect the use of any management accounting techniques that you are studying in this textbook?  Think about these questions.  We plan to spend a lot of time in the next several chapters exploring some possible answers with you.

FYI

By 2004, e-commerce activities across the world will be enormous, amounting to $6.8 trillion, or 8.6% of the global sales of all goods and services.  Interestingly, while the United States accounted for 75% of worldwide e-commerce sales in 2000, that share is expected to drop to a little less than 50% by 2004.

Source: “Global eCommerce Approaches Hypergrowth,” Forrester Research, Inc., April 18, 2000

TO SUMMARIZE

Management accounting plays a key role in organizations today. The top accountant in most organizations is the controller. All accounting functions report to this individual, including the cost accountants, the financial and tax accountants, the internal auditors, and systems support personnel.  Though much management accounting originates within these positions, all decision makers in the organization must understand how to create and use good management accounting information.  Management accounting is also being significantly affected by dramatic improvements in computer technology. Today’s technology allows management to track performance information that goes beyond the cost-based information of