MODULE #1 – DEFINITION, OBJECTIVES, SCOPE AND LIMITATIONS OF MANAGERIAL ACCOUNTING Managerial accounting was introduced in Module 1 and covered the following topics: definition, objectives, scope, and limitations within the management process. According to the Institute of Management Accountants (IMA), “managerial accounting is a profession that involves partnering in management decision making, developing planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy.” Providing managers with financial and nonfinancial decision-making information is a function of management accounting. Managers use accounting information to better inform themselves before making decisions within their organizations, allowing them to manage and control more effectively. Management accounting refers to the area of accounting that provides information to managers to aid in decision-making. Managing effectively is what management accounting is all about. It also aids management in all of its tasks, such as planning, organizing, staffing, and providing direction and control. Management accounting, on the other hand, refers to the area of accounting that provides economic and financial data to managers and other internal users. Management accounting has a broad range of applications. It is primarily concerned with using financial data to resolve business issues and make rational decisions based on scientific reasoning. Management accounting covers, but is not limited to the following areas: Financial Accounting, Cost Accounting, Budgeting and Forecasting, Revaluation Accounting, Cost Control Procedures, Statistical Method, Inventory Control, Reporting, Taxation, Methods and Procedures Design and Installation, Internal Audit, Office Services, Financial Management, and Interpretation. And also there is the limitations of managerial accounting. Based on Records, Lack of knowledge and understanding of related subjects, Intuitive Decisions, Lack of Continuity and Coordination, No Substitute of Administration, Lack of Objectivity, Unquantifiable Variables, Costly, Not in Final Stage, Psychological Resistance.
MODULE #2 – ROLE OF MANAGERIAL ACCOUNTING AND ITS
DIRECTION TOWARD A SPECIFIC FIELD This module focuses on managerial accounting’s role in the management process and the discipline’s movement in a particular direction. We also discussed the roles of management accounting in terms of planning, directing and motivating, and controlling, as well as the differences between financial and managerial accounting and the need for management accounting in both for-profit and nonprofit organizations. Costing out services, products, and other management-relevant items is facilitated by management accounting. Provide data for the purposes of planning, controlling, and improving the situation in real time. Make operational decisions easier for managers with the goal of increasing operational efficiency for the company. Additionally, it assists with long- term investment planning. Management accounting data serves a purpose and is required. Planned action comes first, then motivation and direction follow, and finally control comes last. All of the aforementioned management tasks involve some sort of decision-making. Managers require data to help them make decisions. Management accountants are the ones who provide this kind of data. Although management accountants and financial accountants both play important roles in an organization, there are important distinctions between the two professions. Management accounting is primarily concerned with completing tasks and generating reports that provide financial decision-making information to company executives about the overall operations of the company. The primary goal of financial accounting is to provide the company’s financial status to external parties, such as banks, boards of directors, stockholders, and tax authorities. Also, management accounting can be utilized in both for-profit and nonprofit organizations. MODULE #3 – MANAGEMENT ACCOUNTING INFORMATION SYSTEM
In this module, we explored the importance and benefits of the
Management Accounting Information System, as well as the differences between its internal and external users. By providing timely information on internal operations, a management accounting information system aids businesses in running more smoothly. Managers must have detailed information on specific processes in order to keep costs under control and make sound decisions. There are specific needs for each business and industry. A key benefit of a management accounting information system is that it gives managers the data they need to make well-informed decisions and perform a deeper analysis of operational issues that affect the business. Employees will be able to accomplish more in less time by working more efficiently. Additionally, employees at all levels can access information about their departments and groups, such as inventory levels. However, having a management accounting information system has disadvantages. It is expensive and therefore financially burdensome for the company; it necessitates the hiring of additional IT staff to oversee and maintain the system; it necessitates the training of employees in order for the system to be used effectively; and it necessitates the payment for an upgrade in the future due to the knowledge of the system. There’s the difference between Internal and external users of accounting information. Internal users of accounting information are the people or group of people inside the business organization. Examples of internal users are owner, prospective investors, creditors, and management. While external users are people outside the business entity (organization) who use accounting information. Examples of external users are government, banks, customers, investors, potential investors, and supplier. MODULE #4 – STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS Module 4 covered managerial accountants’ ethical standards. Managerial accounting is concerned with how a manager should carry out their responsibilities in accordance with relevant laws, regulations and technical standards. Management accountants owe a duty to their organizations. They serve their profession, the general public, and themselves by upholding the highest ethical standards of behavior. Competence, confidentiality, integrity, and credibility are among the ethical standards. Management accountants are in charge of ensuring that they maintain a high level of professional expertise by constantly updating their knowledge and skills. Comply with all applicable laws, rules, and technical standards in the performance of their duties as an employee. Provide timely, accurate, clear, and simple decision-support information and suggestions. You must change sentence structures and use a thesaurus to recognize and express professional limitations or other constraints that may limit your ability to make responsible judgments or perform successfully. Confidentiality requires management accountants to keep information secret unless permitted or required by law and to inform all necessary parties on how to use private information appropriately. Keep an eye on subordinate operations to ensure compliance. Don’t use confidential information in an unethical or illegal manner. Genuine conflicts of interest must be avoided by management accountants if they are to maintain their integrity. Keep in touch with coworkers on a regular basis to avoid any potential conflicts of interest. Let everyone know if there are any potential conflicts. Stay away from anything that could put your integrity in jeopardy while you’re trying to fulfill your responsibilities. Also, refrain from taking any actions that could harm the profession’s reputation, whether you take them yourself or support someone who does. To maintain their credibility, management accountants must communicate information in a fair and objective manner, and disclose all relevant information that could have an impact on how the intended audience interprets the reports or recommendations. When faced with significant ethical issues, management accountants should follow the established policies of the organization bearing on the resolution of such conflict when applying the standards of ethical conduct. Management accountants may have difficulties identifying unethical behavior or resolving an ethical conflict.
MODULE #5 – OBJECTIVES AND LIMITATIONS OF FINANCIAL
ANAYSIS In module 5 we discussed the six basic financial statements and their contents. The objectives of financial statements as well as the limitations of financial analysis will also be discussed. Financial statements are the most widely used and most comprehensive way of communicating financial information about a business enterprise to users of the reports. The balance sheet is also referred to as a statement of financial condition because it shows the assets, liabilities, and the difference between their totals at the end of the period for an organization. An income statement shows a company’s assets, liabilities, and current and forecast financial condition. It is one of the most important income statements. U.S. Securities and Exchange Commission (SEC) auditing and financial reporting requirements specify what data and items must be recorded or disclosed in this report. This report summarizes all equity transactions, including the issuance or acquisition of shares, dividend payments, and gains or losses. It also includes narrative explanations and critical annotations on the figures, as well as quantities and other crucial information to help you better understand them. Financial statement analysis includes tools and procedures that allow analysts to study historical and current financial statements in order to evaluate the performance and financial condition of a company and forecast future risks and opportunities. It’s also known as the process of assessing the company’s past, present, and future financial position. The output of a financial analysis can be a helpful decision-making tool because it can reveal important trends and correlations. Financial statements are required to determine whether or not a company is profitable enough and whether or not earnings have increased or decreased from the previous year. They also assist in assessing the company’s financial health, including its ability to repay both short-term and long-term obligations. Financial statements are produced by organizations in order to communicate their financial situation to other stakeholders. They provide insight into the company’s weak spots, allowing management to take corrective action. Forecasting and budgeting are aided by financial statements as well. To hide a bad financial situation, some companies falsify their financial statements. Analyses based on these fictitious financial figures may be misleading because of the window dressing. A specific item may be treated in more than one way, making comparisons across industries difficult. Financial statements are historical by nature, reflecting past events and facts. A postmortem report is all that can be produced by an analysis that relies solely on prior data. It’s possible that one analyst reads “net profit” as net profit before taxes, while another analyst interprets the term differently.