&) FeSO The Review Schoo! of Occonedtoney Monogement Udrisory Services MAS-A: MANAGEMENT ACCOUNTING MANAGEMENT ~ the process of planning, organiaing, and controlling tasks to realize the objectives of an organization. BASIC MANAGEMENT FUNCTIONS PLANNING = ORGANIZING CONTROLLING peritiaers Planning involves: + setting immed te and long-term objectives. ~ deciding which alternative is best suited to attain the set objectives. Organizing involves = deciding how to utilize avaliable resources as plans are carried out, « tackling activities necessary to achieve objectives such as staffing, subordinating, directing and motivating. Controlling involves ‘comparing actual periormance with set plans or standards. deciding what corrective actions to take should there be any deviation (variance) between actual and planned performance. NOTE: decision-making is an inherent function of management; all management functions would require Certain amount of decision-making, MANAGEMENT BY OBJECTIVES (MBO) vs. MANAGEMENT BY EXCEPTION (MBE) MBO the management process in which a subordinate and a supervisor agree on goals and the methods of achieving them: and develop a plan in accordance with that agreement. The subordinate is then evaluated with reference to the agreed plan at the end of the period. MBE the management technique of highlighting those which vary significantly from plans and standards in line with the management principle that executive time should be spent on items that are non-routine and are identified as top prionty. MANAGEMENT ACCOUNTING - an application of appropriate techniques and concepts in processing historical ‘and projected economic data of an entity to assist management in establishing plan to ‘meet economic objectives and in making rational decisions with a view toward achieving the objectives. (American Asscciation of Accountants) ‘Thus, management accounting’s main roie is to provide accounting information to managers who shall use these pieces of information as basis “1. making sound, objective and rational business decisions MANAGEMENT ACCOUNTING vs. FINANCIAL ACCOUNTING User of information 2. Guiding principles 3. Optionay/mandatory 4. Type of information 5. Emphasis of reports 6. Purpose/End result 7. Source of data 18. Amount of detail 9. Focus of information 10. Frequency 11. Time orientation 12. Unifying model FINANCIAL ACCOUNTING Primarily for external users Generally Accepted Accounting Principle Mandatory (especially for juble 2 Hes) Primarily monetary {hnanciai) in nature Reliability (precision of data) Financia reporting and compliance From company’s (internal) info system Compressed and simnpified Focus mainly on business as a whole Periodic (annually, quarterly) Mainly historical (past) data Assets = Liabilities + Equity Page 1 of 4 pages MANAGEMENT ACCOUNTING Exclusively for internal users (management) Management wants and needs Discretionary oF optional Monetary and non-monetary Relevance (timeliness of data) Decision-making From internal and external sources Extensive and detaited Focus on segments and business as a whole As frequent as need arises Future-oriented using current and past data No unifying model or equationReSlh- The Review School of llecoweclancy, MAS-A MANAGEMENT ACCOUNTING CONTROLLERSHIP - the practice of the established science of control, which is the process by which management assures itself that company resources are obtained and utilized according to plans that are in line with the company's set objectives. CONTROLLER - an officer of an organization who has responsibility for the accounting aspect of management Control. It is a title given to a person holding the position of a chief management accounting ‘executive of 9 business enterprise. In many accounting texts and business literatures, the controller is often referred to as the “chief accountant, CONTROLLER | FINANCIAL ¢. REPORTING COST & MANAGEMENT [—* ~ accounring ACCOUNTING INFORMATION SYSTEM FINANCIAL ANALYSIS & ‘SPECIAL STUDIES GOVERNMENT & TAX REPORTING LINE FUNCTION vs. STAFF FUNCTION LINE function ~ the authority to give command or orders to subordinates; it exercises direct downward authority over line departments (¢.9., VP for operations over operations manager) STAFF function ~ the authority to advise but not to command others -- the function of providing line and ‘staff managers with specialized service and technical advice for support; it is exercised, laterally or upward. ‘The controller primarily exercises a staff function as the controller's office gives advice and service to ‘other departments and to entire organization as a whole; however, in an accounting department headed by the controller, the controller has a line authority over subordinates within the department. CONTROLLER vs. TREASURER ‘To avoid incompatible duties being assigned to 2 single officer, a controller (recording function) must not hold at the same time the position of a treasurer (custody function). Consider the following CONTROLLER ‘TREASURER 1. Planning and control 1. Provision of capital =~ 2. Reporting and interpreting _—_2. Investor relations. 3. Evaluating and consulting _—_3. Short-term financing 4. Tax administration 4. Banking and custody 5. Government reporting 5. Credit and collections 6. Protection of assets 6. Investments 7. Economic appraisal 7. insurance STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS ‘According to the Standards of Ethical Conduct set by the Institute of Management Accountants (IMA), management accountants have a responsibilty to ‘maintain an appropriate level of professional expertise, perform duties in accordance with laws, regulations and technical standards | |< provide accurate, clear/concise and timely information “recognize limitations in performing duty that precludes responsible judgment ‘.Fefrain from disclosing confidential information acquired in the course of their work, except when authorized and/or unless legally obligated to do so ib ‘avoid/mitigate any conflicts of interest and advise concerned parties of any | potential conflicts | refrain from engaging in any activity that would prejudice their ability to carry out their duties ethical faces [T= communicate information fairly and objectively 4 |" disclose all relevant information that’ could reasonably LE | understanding of rp commendations. COMPETENCE | CONFIDENTIALITY | INTEGRITY Influence | OBJECTIVITY Page 2 of 4 pagesReSQ- The Review School of Uccomtancy MANAGEMENT ACCOUNTING MULTIPLE-CHOICE QUESTIONS (Sources: CMA/C:A/RPCPA/AICPA/Various test banks) 1. The discipline of accounting concerned with providing information to management in making decisions about business operations. 2. Cost accounting b. Financial accounting Government accounting d. Management accounting The primary purpose of management accounting is to provide information ‘a. To internal users b. To external users To management and government . To both internal and external users 3. For decision-making purposes, managers are more concerned with receiving information thet is: ‘a. Completely accurate and precise b. Completely objective and verifiable Relevant, completely accurate ana precise ‘ . Relevant, flexible and immediately available rainess 4, Management accounting 'a._ Is discretionary rather than mandatory . Is concerned only with monetary information €. Is governed by Generally Accepted Accounting Principles (GAAP) ._ Is focused on business as a whole rather than on segments of the business '5, Management accounting is similar to financial accounting in that ‘Both classify reported information in the same way Both concentrate with historical costs Both deal with economic events Both are governed by GAAP 6. Which of the statements is TRUE regarding anagerial accounting? '2. It may use estimates and forecasts B._ It complies with external reporteriat requirements C. itis concerned with reporting to external users of accounting information S. Ttincludes branches like job order costing, process costing, standard costing, and activity- based costing (ABC) 7. Which of the following statements is TRUE? "2. Financial accounting is a subset of cost accounting . Management accounting is a subset of cost accounting CL Management accounting is a subset of both cost and financial accounting §. Cost accounting Is @ subset of both management and financial accounting 8. Decision-making is required in which of the tollewing management function(s)? a. Planning b. Planning and contro! Planning and organizing 4. Planning, organizing and contro! 19. The management function that involves overseeing day-to-day activities. ‘a. Planning b. Controlling Directing and motivating Ga ompriong, ‘4. Rationalizing and decision-making 410. What is the function of management that compares planned results against actual results? ‘a. Planning b. Controlling © Organizing 4. Decision-making Page 3 of 4 pagesRSQ. The Review School of Oeconritaney MAS-A MANAGEMENT ACCOUNTING u 12. 13, 16. 15. 16. 17, 18. 19, ‘The management control process contains the following four sequential steps, including A) Measuring actual performance 8) Establishing standards of performance ©) Implementing a pragrain of corrective action. ©) Comparing actual performance with standards What is the proper sequence of these activities? a. 4,B,C,D « b. A,8,0,C 4 The controller primarily occupies a ‘a. Line position b. Staff position €. Non-supervisory rank-and-file position 4. Position with very little influence in management decision-making A STAFF position is 2. The primary function of a company’s treasurer b. Exercised downward in doing the command function ©. Directly involved in achieving the basic objectives of the organization 4d. Supportive in nature since it provides assistance to other company segments, Which of the following is most kely # LINE positie 2. VP for Research of a conglomerate rirm b. Store manager of a retail convenience outiet © Chief financial officer of a merchandising company 6. Human resources manager for an educational institution CONTROLLERS are usually not concemed with ‘a. Preparation of tax returns b. Reporting to government c.Protection of assets 4. Investor relations TREASURERS are usually not concerned with '@. Financial reporting b. Short-term financing c. Cash custody and banking 4d. Credit extension and collection of bad debts, Which of the following is not covered by the Standards of Ethical Conduct for Management Accountants? ‘a. Integrity Competence b. Objectivity d. Independence If @ management accountant has @ problem in identifying unethical behavior or resolving an ethicat conflict, then the first action to take shauid be: ‘a. Resign from the company b. Consult the board of directors Notify the appropriate law enforcement agency d. Discuss the problem with immediate supervisor ‘A management accountant discovers that his/her company is violating environmental regulations. If immediate supervisor is involved, the appropriate action is to 2. Consult the audit committee . Confront the immediate supervisor Present the matter to the next higher managerial level 4. Do nothing since she has @ duty of loyalty to the organization Ts accurate Is easily understood by the user Helps managers improve their decisions Management accounting information is deeined most successful if . « 4. Helps creditors evaluate the company's ability to pay its debts, Page 4 of 4 vages