BSA33 – MANAGEMENT ACCOUNTING I is advisory in nature, assisting those directly

involved.
Unit I – Objectives, Roles, And Scopes of
Management Accounting Management Accounting is staff function
with responsibility of providing those with line
MANAGEMENT ACCOUNTING function assistance in areas of budgeting,
Branch of accounting that deals with acctg controlling, pricing, and other special decisions in
system that provides mngt info to improve its improving ops.
efficiency by determining policy and formulating Cost Accounting collects info on business’s total
plans to achieve its goals. Helps managers in prod. cost by evaluating variable and fixed costs.
planning, controlling, and analyzing the perf of the
org towards improvement. Financial Accounting prepares FS used to show
org’s financial results and role to external
Institute of Management Accountants (IMA) individuals
says that “…a profession that involves partnering in
mngt decision making, devising, planning and
performance mngt systems, and providing expertise DISTINCTION AMONG MA, CA, and FA
in financial reporting and control to assist mngt in
In terms of: MA FA
the formulation and implementation of org’s Info users Internal Internal and
strategy” External
Accounting Internal reports Audited FS for
report needed by general public
Nature of Management Accounting management for
business ops
Chartered Institute of Management Policies Defined by GAAP/IFRS/IAS/
Accountants (CIMA) says that MA: management PFRS
Basis of info Internal and Based on historical
 combines acctg, finance, and mngt with external trans transactions
business skills to add real value to org focusing on
 is across the business (advising managers, future of
formulate business strategy and monitor risk) business
 uses all info to lead strategy and drive success Emphasis Data must be Data must be
RELEVANT RELIABLE AND
 uses info to develop dynamic solutions OBJECTIVE
Preparation Depends on Periodically
Functions of Management Accounting of report need
Info No requirement Required by BIR,
1. Planning. Setting of goals and objs and requirements SEC and other
ways to achieve them GAs
2. Directing. Overseeing company’s day to
day ops to adjust stuff.
ROLES AND ACTIVITIES OF
3. Controlling. Evaluating results of business
CONTROLLER, TREASURER AND THE CFO
ops against plans and making adjustments as
needed. CONTROLLER
4. Decision Making. Continuous while - Responsible for all accounting-related
planning, directing and controlling ops. activities of business; handles high-level
accounting, MA and financing acts.
Line Functions vs Staff Functions - A staff function; also called Chief
Accounting Officer tasked on:
Line Function exercises authority over
o Budget and schedules
subordinate, has knowledge about operation, and
directly involve in operations while Staff Function
 o Collection, analysis and
consolidation of financial data
o Monitoring of variances
o Summarize trends
o Investigates on budget variance
o Financial accounting reports
o Tax filing
Qualifications of the Controller
 Technical knowledge and skills in accounting
and finance
 Knowledge and skills in planning, organizing,
and control
 General knowledge and understanding of
business industry, competitors, social,
economic and political environment
 Knowledge and understanding of company’s
business portfolio
 Good oral and written communication skills
 Good interpersonal relationship skills to all
levels of management and employees
 Team player
TREASURER
- Responsible with short term and long term
financing as well as management of cash
and tasked in the following:
o Custody of fund invested in various
marketable securities
o Manage cash and marketable secs
o Maintain good relation with
investors, banks and creditors
o Prepared sales forecasts
o Obtain finances from banks and
lenders whenever needed
CHIEF FINANCIAL OFFICER
- Senior executive responsible for managing
financial ops. Also called Financial Director
and has several functions such as:
o Controllership which includes
providing financial info for reports to
managers
o Treasurer (managing of cash and
financing)
o Risk Management
o Taxation
o Internal audit
INTERNATIONAL CERTIFICATIONS IN MA
 IMA – US since 1973
 PAMA – established in 1972 in PH affiliated
with National Assoc of Accountants, NY
Unit II – Cost Terms, Concepts and Behavior
NATURE AND CLASSIFICATION OF COSTS
COST is defined by:
 Accounting Institute of CPA as “amount
measured in cash expended or other property
transferred, capital stock issued, services
performed, or liab incurred in consideration of
goods/services to be received”
 William Massie (WM) Harper as “value of
economic resources used as result of
producing or doing the thing cost”
Cost means different ways in MA depending on
management needs; can also be classified in
different ways depending on type of org. Costs can
be collected into groups called Cost Pools classified
as: 1) type of cost; and 2) by source.
Costing is the technique of determining cost.
Cost Object unit to which cost is assigned
Cost Assignment process of assigning cost to pools
or from pools to objects
Cost Allocation assignment of indirect cost to pools
Cost Drivers factors that has effect on changing
level of total cost
COST CLASSIFICATION
According to Nature
 MANUFACTURING COSTS incurred in
production of goods classified as:
o Direct Materials easily identifiable with
finished product. Includes invoice plus
other costs (shipping, delivery, containers
less any returns/royalty; trade/cash
discounts). Scraps and quality assurance
samples used and destroyed in testing.
 o Direct Labor time used in production
paid to direct workers in wages per day,
hour or piece.
o Manufacturing Overhead cost during
manufacturing of product indirectly i.e.
factory taxes, indirect wages, supervisor’s
salary, depreciation and utilities.
Prime Costs = Direct Materials and Direct Labor
Conversion Costs = DL and MO
Applied MO – predetermined overhead cost
According to Function
 Production Costs incurred in production
 Administrative Costs incurred in admin eg.
Office supplies, office salaries, etc.
 Selling and Distribution Cost incurred in
relation to marketing, selling eg. Sales salaries,
store rent, freight out, advertising, etc.
 R&D Cost incurred in research for
improvement
According to Timing of Recognition as Expense
 Product Cost involved in acquiring or
production; aka Inventoriable Costs attached to
units eg. DM, DL, and MO assigned to cost of
inv (assets) until sold and be COGS (expense)
 Period Cost outright expensed in period
incurred eg. Selling and distribution costs such
as rent and advertising.
According to Management Decision Making
 Marginal Cost change in aggregate cost due
to volume of output by one unit
 Differential Costs incremental cost.
Difference between total cost of one
alternative over another used in decision
making
 Opportunity Costs missed or sacrificed
chances in favor or alternative course.
Revenue that could have been. Not recorded in
books.
 Relevant Costs are future costs considered for
the change it will bring. Used to eliminate
unnecessary cost.
 Sunk Costs past costs incurred and are
irrelevant for future decision making
 Replacement Costs incurred in replacing
existing asset at present or future date
 Abnormal Costs incurred unexpectedly
 Controllable Costs can be regulated or altered
According to Traceability
 Direct are traceable to the goods produced
 Indirect aren’t traceable to the goods
According to Planning and Control
 Standard prearranged cost estimates that
should be accomplished on cost per unit
 Budgeted planned for given period of time
 Absorption Costing costing method that uses
all manufacturing costs. Also called Full Cost
Method.
 Ordering Cost cost increases with number of
times the order is placed in inventory
 Out-of-Pocket Cost cost made out of direct
payment in current expenditure
COST CLASSIFIED ON THE FS
Cost Found in SFP (Balance Sheet)
 Raw Materials. Raw mat and prod supplies to
be used in production still on hand at period
end
 Work in Process. Unfinished goods or
partially completed at period end
 Finished Goods. Completed but still on hand.
Cost Found in IS
For Merchandising/Trading Company
Inv. Beg.
Add: Net Purchases
TGAS
Less: Inv, end
Cost of Goods Sold
For Manufacturing Company
Raw Materials, Beg.
Add: Net purchases
Raw Materials Available for Use
Less: Raw Materials, End
Raw Materials Used
Direct Labor
Manufacturing Overhead
Total Manufacturing Costs
Add: WIP, beg
Total Goods in Process
Less: WIP, end

Cost of Goods Manufactured

Add: Finished Goods, Beg
Cost of Goods Available for Sale
Less: Finished Goods, End

Cost of Goods Sold

ANALYSIS OF COST BEHAVIOR

(VARIABLE, FIXED, SEMI-
VARIABLE/MIXED)

Cost Classified According to Behavior

 Fixed Cost. Remains the same regardless of
change in volume of production eg. Rentals,
insurance, etc.
 Variable Cost. Varies in nature with change
to volume.
 Semi-Variable Cost. Partly fixed and variable

Refer to the Module. Too Hard to Summarize.