Management Accounting Management by Exception – investigate only major deviation

 Application of appropriate technique and concepts to economic from plan.

data 3. Decision making – integral part of planning and controlling
 Assist management in establishing plans a. Reward or punish
 Assist is rational decision making b. Change operation or revise plan
 Operation Processes Management Accounting vs Financial Accounting
 Financial report to nonmanagers (shareholders, creditors, tax FA MA
authorities, regulatory agency Objective Internal & External Internal User
Objective User
IFRS Compliance Yes Optional
 Provide information to people inside the organization –direct and
Emphasis on the Past Financial Data Yes
control operations
Future
 Provide timely and frequent reports on KI
Relevance and Different users Specific user
 Analysis of business situation or opportunity flexibility of data
 Analytical report Precision and Late Time is of essence
Scope timeliness of report
 Score keeping Focus of report Whole company Part or segment
 Interpreting and reporting FI Compliance with law Required Not mandatory
 Problem solving
Administrative Functions Categories of Management Accountant’s Responsibility
1. Planning – identifying alternative and selecting course of action 1. Planning
a. Resource Planning 2. Reporting
i. Cash budget 3. Controlling
ii. Capital budget 4. Resource Management
iii. Projected statement of financial position 5. Information System development
b. Profit Planning 6. Technological Implementation
i. Break even analysis 7. Verification
ii. Projected income statement 8. Administration
2. Control – evaluation of managers and operations Operation Processes
a. Performance report 1. Identification – recognition of economic events
i. Report used to evaluate mangers and 2. Measurement – quantification
operations 3. Accumulation – disciplined and consistent recording and
ii. Accounting control reports classifying
1. Cost Variance Analysis 4. Analysis – determination of reasons and relationship of events to
2. FS Analysis reports
3. GPV Analysis
 5. Preparation and Interpretation – meaningful coordination of data 2. Confidentiality
to provide information a. Refrain from disclosing confidential information unless
6. Communication – reporting authorized
Line Authority – authority to command or give orders b. Inform subordinates regarding confidentiality of
Staff Authority – advise but not command others; lateral or upward information
Staff – Accounting Function 3. Personal Integrity
Functional Authority – right to command laterally or downward a. Avoid actual or potential conflict of interest
CFO – finance director – executive responsible for financial operations b. Refrain activity that would prejudice the ability to work
Responsibilities of CFO ethically
1. Controllership – providing FI for reports c. Refuse any gift, favor or hospitality that would influence
2. Treasury – Banking, short/long term Financing Investments, actions
management of Cash d. Refrain from actively or passively subverting attainment
3. Risk Management – interest rate, exchange rate, derivatives of goals and objective
4. Taxation e. Recognize and communicate limitations and constraint
5. Internal Audit f. Communicate favorable, unfavorable judgment or
Controller – chief accounting officer – management of FA and MA, top opinion
managerial accounting, integral part of top management, staff authority to g. Refrain activity that would discredit profession
other department, line authority to own department 4. Objectivity
Controllership – science of control of resources a. Communicate information fairly and objectively
Treasurer – custody of cash and funds, maintain relationship to investors, b. Disclose all relevant information
creditors, banks
Basic Functions of Controllership Resolution of Ethical Conflict
1. Planning 1. Discuss problems to immediate superior
2. Control 2. If superior is CFO, AUDITCOM, EXCOM, BOD, BOT, Owners
3. Reporting 3. Clarify with IMA ECS
4. Accounting – System 4. Consult own attorney
5. Other Primary Responsibilities 5. Resign and notify parties
Standards of Ethical Conduct for Practitioners of MA and FM – IMA International Federation of Accountants (IFAC) – Guidelines on Ethics for
(institute of Management Accountants) Professional Accountants
Areas of Ethical Responsibilities (Guidelines of Ethical Behavior) Revised Code of Ethics for Professional Accountants – Jan 1, 2014
1. Professional Competence
a. Ongoing development of knowledge and skills CMA (1972)
b. Accordance to law, regulations, technical standards 1. Economics, Finance and Management
c. Complete and clear report based on reliable and relevant 2. Financial Accounting and Reporting
data 3. Management Reporting, Analysis and Behavioral Issues
 4. Decision Analysis and Information System Process Reengineering
CFM (1996)  Radical approach than TQM
1. Economics, Finance and Management Business Process
2. Corporate Financial Management  Series of steps
3. Management Reporting, Analysis and Behavioral Issues
4. Decision Analysis and Information System 4. Benchmarking
Philippine Association of Management Accountants (PAMA)  Determines success factors
Philippine Institute of Management Accountants (PIMA)  Best practices
 Beat performance of competitors
Contemporary Management Techniques 5. Mass Customization
1. JIT – as needed or demanded, pull-it-through approach, reduce  Customized product and services
inventory to minimum or zero
Characteristics 6. Balanced Scorecard – financial and non-financial success factors
a. Elimination of no value activities, in relation to product a. Financial Performance
b. High level of quality b. Customer satisfaction
c. Continuous improvement as to efficiency c. IBP
d. Simplification d. Innovation and learning
Benefits 7. Activity Based Costing and Management
a. Improved working capital  Activity Analysis (AA) -detailed description of specific
b. Time activities
c. Area  ABC -AA to improve accuracy of cost by tracing costs – to
d. Lesser waste product, to customer
2. TQM – high quality product and efficient production, exceeds  ABM – AA to improve operational and management
customer expectation, continuous quality improvement program control
Characteristics 8. Theory of Constraints (TOC)
 Focus on servicing customers  Sequential process of identifying and removing
 Systematic problem solving constraints or barriers
3. Process Reengineering – simplification and elimination of waste 9. Life Cycle Costing
effort  Identify and monitor costs of product throughout its life
Reengineering cycle
 Creating competitive advantage 10. Target Costing – desired cost
 Fundamental rethinking and redesign of business Target Cost = Market Determined Price – Desired Profit
 11. CAD & M
 CAD – development, analysis, design
 CAM – plan, implement and control production
12. Automation
 FMS
 CIM
13. E-Commerce
14. TVC
 Specific steps to provide product or services

Operating Cycle – time required to purchase or manufacture inventory, to

sell and collect cash
Working Capital – current assets less current liabilities.

Cash and Cash Equivalent (highly liquid investment, acquired 3 months

before maturity)
Marketable Securities – cash substitute, not needed immediately, less than
one year, riskless, highly liquid
Prepayments – expires w/n 1 year, current, long term, non-current
Discontinuing Operations – sells major portion of its business
Depreciation – tangible
Amortization – intangible
Depletion – natural resources