ACC 111

OBJECTIVE, ROLE AND SCOPE OF MANAGEMENT ACCOUNTING

A. Management Accounting
1. Management accounting measures, analyzes, and reports financial and nonfinancial information
that helps managers make decisions to fulfill the goals of an organization.
2. Management accounting is concerned with providing information to parties inside an
organization so that they can plan, control operations, make decisions, and evaluate
performance.

B. Financial Accounting
1. Financial measures and records business transactions and provides financial statements that are
based on generally accepted accounting principles (GAAP).
2. Financial accounting focuses on reporting to external parties such as investors, government
agencies, banks, and suppliers.

Major Differences Between Management Accounting and Financial Accounting

Users
Focus and Emphasis
Relevance of Data
Rules of Measurement and
Reporting
Management Accounting Financial Accounting
Managers of the organization Communicate organization’s
(Internal Users) financial position to investors,
banks, regulators, and other
outside parties
(External Users)
Reports are future oriented and Reports summarizes past
aids decision makers by activities and focuses on
providing good estimates as precision when reporting
soon as possible
Data should be relevant to the Data should be objective and
decision being made verifiable
Reports are not bound by GAAP Conforms with GAAP and IFRS
and IFRS Reports are mandatory
Reports are not mandatory

C. Cost Accounting
1. Cost accounting measures, analyzes, and reports financial and nonfinancial information relating
to the costs of acquiring or using resources in an organization.
2. Cost accounting information addresses the demands of both financial and management
accounting and is thus represented as the intersection of the financial and management
accounting systems.
a. Uses of Cost Accounting Information
1. Determining products costs and pricing
a. To determine the selling price of a product
b. To meet competition
c. Bidding contracts
d. Analyze profitability
2. Planning and control
a. Clearly defined objective
b. Preparation of a production plan
c. Assigning responsibility
d. Periodically measuring and comparing results
e. Taking necessary corrective action

b. Chief Financial Officer (Finance Director)

The executive responsible for overseeing the financial operations of an organization. The
responsibilities of the CFO usually include the following areas.
1. Controllership – includes providing financial information for reports to managers and
shareholders, and overseeing the overall operations of the accounting system. Chief
Accounting Officer (Controller)
2. Treasury – includes banking and short and long term financing, investments, and cash
managements
3. Risk management – includes managing the financial risk of interest-rate and exchange-rate
changes and derivatives management
4. Taxation – includes income taxes, sales taxes, and international tax planning
5. Investor relations – includes communicating with, responding to, and interacting with
shareholders
6. Internal audit – includes reviewing and analyzing financial and other records to attest to the
integrity of the organization’s financial reports and to adherence to its policies and
procedures