1.2 - Introduction To Management Accounting & Recent Developments

15/12/2021
MANAGEMENT ACCOUNTING
(AC310MAN)
Introduction, Basic Concepts, and Recent Developments.
Prepared by:
Ms. Grace A. Padiernos, CPA, CMA
PROF. GRACE A. PADIERNOS, CPA, CMA
WARNING
You may not copy, reproduce, distribute,
publish, display, perform, modify, create
derivative works, transmit, or in any way
exploit any such content, nor may you
distribute any part of this content, sell or
offer it for sale, or use such content.
1
15/12/2021
Observe and
Respect the
Republic Act
No. 8293, An
Act Prescribing
the
Intellectual
Property Rights
Law (IPR).
THIS MATERIAL IS INTENDED FOR

AC310MAN ONLY:
Do not share this in any

Do not share this material to public or social media
anyone who is not enrolled in sharing sites or study
this class. resources websites (Example:
SlideShare, Course Hero etc.)
2
15/12/2021
Intellectual Property
Rights of Materials or Resources
Understand that these materials and resources are the property of
the National University - Laguna, copyrighted to the respective
authors of each material or resource. Students shall use these
materials and resources (Example: PowerPoint or PDF files or
recorded videos of lesson, etc.) only for the intended purpose of
learning in this course. To ensure that these materials are not
reproduced, shared, or used outside of the University and for
purposes not consistent with the intent of the course.
INTRODUCTION AND CONCEPTS TO

MANAGEMENT ACCOUNTING
3
15/12/2021
• It is the process of identifying, measuring,

Management analyzing, interpreting and communicating
Accounting information in pursuit of organization’s goals
(Hilton, 2010)
• Decision making
The activities • Planning
or function of • Directing and motivating
management • Controlling
• Improving
4
15/12/2021
The activities
or function of
management
• Decision making is the process of making

choices by identifying a decision,
gathering information, and assessing
1. Decision-making alternative resolutions.
• It is involved in the all of the other three
functions of management.
• It entails choosing among alternatives
available to management.
• Not a separate function of management.
• Inherent in each of the preceding
management processes is decision
making.
• In managing a company, management
must continually decide among
alternative actions.
10
5
15/12/2021
• Setting of immediate, as well as long-

range goals for the organization.
2. Planning • Predicting future conditions that are
expected to prevail.
• Considering different means to achieve
goals.
• Deciding which means should be used
to achieve goals.
• Developing the company’s objectives
(goals) and translating these objectives
into courses of action.
11
• It is the management function which

3. Directing pertains to the day-day activities in
or running the business.
• The process by which managers run
Motivating day-to-day operations.
12
6
15/12/2021
• The organization operates in the

intended manner.
4. Controlling • Achieve its goals.
• Monitoring operating results and
comparing actual results with the
expected results is controlling.
• This feedback allows management to
isolate areas for further investigation
and possible remedial action.
• It may also lead to revising future
plans.
• This philosophy of controlling by
comparing actual and expected results
is called management by exception.
13
Management
by exception
• Management by
exception is the practice
of examining the financial
and operational results of
a business, and only
bringing issues to the
attention of management
if results represent
substantial differences
from the budgeted or
expected amount.
14
7
15/12/2021
Management
by exception
• A technique of investigating only
those results that vary
significantly from standards in
line with the management
principle that executive time
should be specific on items that
are not routine.
15
Management
by objectives
• Management by Objectives
(MBO) is a strategic approach
to enhance the performance
of an organization. It is a
process where the goals of the
organization are defined and
conveyed by the management
to the members of the
organization. Organizational
structures with the intention
to achieve each objective.
16
8
15/12/2021
Management
by objectives
• A procedure 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.
17
• Feedback is also used by managers to

support continuous process
improvement.
5. Improving • Continuous process improvement is
the philosophy of continually
improving employees, business
processes, and products.
18
9
15/12/2021
• Resource management
Other • Information system development
activities of • Technological implementation
Management • Verification
• Administration
Accountants
19
• Involves a system of reporting that is

aligned with organizational
responsibilities.
Resource • Will contribute to the effective use of
Management resources and measurement of
management performance.
20
10
15/12/2021
• Design and development of the overall

management information system by:
Information o Determining the output required by users.
o Specifying the data inputs needed to
System obtain the required output.
o Developing the requirement for a
Development processing system.
o Managing and securing the data bases.
21
• Management accountants should be

familiar with current technology
relative to information processing and
Technological the accounting techniques appropriate
Implementation to controlling and using the
information.
22
11
15/12/2021
• Management Accountants assure the

accuracy and reliability of information
derived from the accounting system or
Verification related sources that are throughout
the organization.
23
• Includes the development and

maintenance of effective and efficient
management accounting organization.
Administration
24
12
15/12/2021
STANDARDS OF ETHICAL CONDUCT FOR

MANAGEMENT ACCOUNTANTS
Competence
Confidentiality
Integrity
Objectivity
25
COMPENTENCE
• Maintain an appropriate level of professional competence by ongoing development of

their knowledge and skills.
• Perform their professional duties in accordance with relevant laws, regulations and
technical standards.
• Prepare and complete and clear reports and recommendations after appropriate
analyses or relevant and reliable information.
26
13
15/12/2021
CONFIDENTIALITY
• Refrain from disclosing confidential information acquired in the course of their work,
except when authorized, unless legally obligated to do so.
• Inform subordinates as appropriate regarding the confidentiality of information acquired
in the course of their work and monitor their activities to assure the maintenance of
their confidentiality.
• Refrain from using or appearing to use confidential information acquired in the course of
their work for unethical or illegal advantage either personally or through third parties.
27
INTEGRITY
• Avoid actual or apparent conflict of interest and advise all appropriate parties of any
potential conflict.
• Refrain from engaging in any activity that would prejudice their ability to carry out their
duties ethically.
• Refuse any gift, favor or hospitality that would influence or appear to influence their
activities.
• Refrain from either actively or passively subverting the attainment of the organization’s
legitimate and ethical objectives.
28
14
15/12/2021
OBJECTIVITY
• Communicate information fairly and objectively.

• Disclose fully all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports, comment and recommendations
presented.
29
• Financial Accounting
• Management Accounting
Branches
of • Cost Accounting
Accounting • Tax Accounting
• Government Accounting
30
15
15/12/2021
Financial Accounting
• The broadest branch of accounting.
• Concerned with recognition,
measurement, and communication
of economic resources, economic
obligations and changes in economic
resources and economic obligations.
• Information is communicated
through complete set of financial
statements.
• Conform to the Generally Accepted
Accounting Principles (GAAP).
31
Management Accounting
• Serves the information needs of
the internal users, specifically the
active owners and managers in
making and implementing short-
term and long-range plans for the
enterprise.
• Reports are not required to
conform with GAAP.
32
16
15/12/2021
Cost Accounting
• Concerned with the measurement
and recognition of cost of goods
manufactured (CGM) and cost of
goods sold (CGS).
Financial Cost Management

accounting accounting accounting
33
Management
Accounting
VS.
Financial
Accounting
34
17
15/12/2021
MANAGEMENT FINANCIAL
Users Internal users (managers, External users (investors,
executives, etc.) creditors, lenders, etc.)
Frequency of As needed Periodic (annually)

reporting
Management
Time orientation Projections, budgets, estimates, Historical data
historical data
Accounting
Focus of information Segments / Division / Business as a whole (aggregated)
Departments
VS.
Type of information Financial and non-financial Financial
Emphasis Relevance & timeliness Objectivity, Reliability & Precision
Financial Guiding principles Needs of management Generally Accepted Accounting
Accounting Requirements Optional

Principles (GAAP)
Mandatory
Purpose Decision-making Reporting
Sources of data Drawn from internal and external Drawn from company’s system
system
Unifying model None Assets = Liabilities + Equity
35
The departments in a company can be viewed as having either of the

following:
• Line responsibilities
• Staff responsibilities
A line department is directly involved in providing goods or services

to the customers of the company.
Line position • Senior Vice President—Equipment
• Plant Manager—Chicopee, MA Plant
VS. • Senior Vice President—Callaway Brand

• Managing Director.
Staff position A staff department provides services, assistance, and advice to the
departments with line or other staff responsibilities. A staff
department has no direct authority over a line department.
• Senior VP—Chief Administrative Officer
• Vice President, Human Resources
• Chief Financial Officer
• Controller
36
18
15/12/2021
LINE STAFF
Definition A position that is DIRECTLY A position that is INDIRECTLY
Line position involved in the provision of goods

and services.
involved in the provision of goods
and services.
VS. Examples CEO, COO, Plant manager, Plant

Mainly providing support role.
Internal Auditor, CFO, Controller,
Staff position
supervisor, Sales agent, Treasurer, Accountant
Warehousemen
37
MANAGEMENT
Controller Treasurer
-Accounting aspect of work -Safeguarding of assets and capital
-Income tax return preparation -Cash custody and banking
CHIEF Reporting
Tax administration
Acquisition of assets
Provision of capital
FINANCIAL Internal control

Government reporting
Financing
Insurance
OFFICER Planning for control

Economic appraisal
Investor relations
Investments
Evaluating and consulting Credit & collections
Banking & custody of funds
Short-term financing
38
19
15/12/2021
RECENT DEVELOPMENTS
39
Recent Developments
in Management
Accounting
• Customer value - It is the

difference between what is
received and given up by the
customer when procuring a
product or service (Roque, 2014).
• Customer receives – customer
gives up = VALUE
• Customer receives – everything
that has to do with product.
• Customer gives up – price or
any cost related to the product.
40
20
15/12/2021
Recent Developments
in Management
Accounting
• Value chain - It is the set of
activities required to design,
develop, produce market and
deliver products and services to
customers (Roque, 2014).
1. Secure resources
2. Research and development
3. Product design
4. Production
5. Marketing
6. Distribution and sales
41
Recent Developments
in Management
Accounting
• Total Quality Management

(TQM) - It is a broad set of
processes designed to focus the
entire organization and its
employees on providing
products and services that do
the best possible job of
satisfying the customer.
42
21
15/12/2021
Recent Developments
in Management
Accounting
• Concept of TQM:
Continuous improvement - is
the constant effort to eliminate
waste, simplify process and
product design and improve
quality and customer service.
43
Recent Developments
in Management
Accounting
• Kaizen costing - It means

continuous improvement
through small betterment
activities rather than large
and radical improvement
through innovations and
huge investment in
technology.
44
22
15/12/2021
Recent Developments
in Management
Accounting
• Reengineering - It is the
complete redesign of a
process with an emphasis on
finding creative ways to
accomplish and objective
(Hilton, 2010).
45
Recent Developments
in Management
Accounting
• Activity-based costing - It is a two-

stage procedure used to assign
overhead cost to products and
services. First, significant activities
are identified, and overhead costs
are assigned to the activity cost
pools in accordance with the way
resources are consumed by the
activities. Then overhead costs are
allocated from each activity cost
pool to each product line in
proportion to the amount of the
cost driver consumed by the
product.
46
23
15/12/2021
Recent Developments
in Management
Accounting
• Theory of constraints
-This approach seeks to find the
most cost-effective way to
alleviate an organization’s most
limiting constraints.
-A method of analyzing the
bottlenecks (constraints) that
keep a system from achieving
higher performance.
47
Recent Developments
in Management
Accounting
• Just-in-time inventory
management - It is a system
wherein raw materials are
purchased and components
are produced just in time to
be used at each stage of
production process.
48
24
15/12/2021
Recent Developments
in Management
Accounting
• Flexible Manufacturing
System – a production system
in which a single factory
manufactures numerous
variations of products
through the use of computer-
controlled robots.
49
Recent Developments
in Management
Accounting
• Life Cycle Costing – the

accumulation of costs for
activities that occur over the
entire life cycle of a product
from inception to
abandonment by the
manufacture and the
consumer.
50
25
15/12/2021
Recent Developments
in Management
Accounting
• Target Costing – a method of

determining what the cost of
a product should be based on
the product’s estimated
selling price less desired
profit.
51
OTHER BASIC CONCEPTS
52
26
15/12/2021
COST CLASSIFICATION
Responsibility
Behavior centers or cost Controllability
objects
Importance in
Management
decision- FS classification
discretion
making process
53
COST CLASSIFICATION
Responsibility
objects
Importance in
Management
discretion
making process
54
27
15/12/2021
1. Variable Cost
 Total variable cost increases proportionately with an increase in the
activity
 Variable cost per unit remains constant
TOTAL PER UNIT

55
2. Fixed Cost
 Total fixed cost remains constant
 Fixed cost per unit fluctuates or inversely related with the activity
level
TOTAL PER UNIT

56
28
15/12/2021
3. Mixed/Semi-variable/Hybrid Cost
 Combination of variable and fixed
TOTAL PER UNIT
57
4. Step-fixed Cost
 Costs that remain constant for a period but is subsequently affected
by the level of activity.
TOTAL PER UNIT
58
29
15/12/2021
5. Step-variable Cost
 Costs that are closely classified as variable; characterized by small
increments.
59
6. Curvilinear
 Costs depicted by a curved graph; incorporating concepts of
marginal costs
60
30
15/12/2021
COST CLASSIFICATION
Responsibility
objects
Importance in
Management
discretion
making process
61
1. Direct Cost
Costs that can basically traced to a cost object
62
31
15/12/2021
2. Indirect Cost
 Cost that cannot be easily traced to a cost

object
63
3. Common Cost
 Indirect or non-traceable costs incurred for

the benefit of more than one business unit
64
32
15/12/2021
4. Joint Cost
 Indirect or non-traceable costs that arise from

the simultaneous processing or manufacturing
of products produced from the same processes
65
COST CLASSIFICATION
Responsibility
objects
Importance in
Management
discretion
making process
66
33
15/12/2021
1. Controllable
 Cost over which a

production manager has
influence
67
2. Non-controllable
 Costs over which a

production manager has no
influence
68
34
15/12/2021
COST CLASSIFICATION
Responsibility
objects
Importance in
Management
discretion
making process
69
1. Committed Cost
 Costs which require a series of payments over

a long period of time
 Governed by past decisions
 Cannot be reduced or avoided
 Ex. Depreciation
70
35
15/12/2021
2. Discretionary or
Programmed Cost
 Costs which are fixed as a result of
management policy
 Avoidable
 Ex. Advertising cost, research and
development
71
COST CLASSIFICATION
Responsibility
objects
Importance in
Management
discretion
making process
72
36
15/12/2021
1. Differential Cost
net difference of cost between
two alternative courses of action
73
2. Relevant Cost
costs which are material to the
decision making of managers
74
37
15/12/2021
3. Irrelevant Cost
Costs which do not affect the
decision making of managers
75
4. Sunk Cost
Cost incurred in the past and
cannot be changed by a future
action
76
38
15/12/2021
5. Marginal Cost
Extra cost incurred when one
additional unit is produced
77
6. Out-of-pocket Cost or
Explicit Cost
Cost that require cash outlay
78
39
15/12/2021
7. Opportunity Cost
Benefit forgone by choosing
an alternative course of action
79
COST CLASSIFICATION
Responsibility
objects
Importance in
Management FS
decision-
discretion classification
making process
80
40
15/12/2021
 Cost of goods manufactured, or cost of goods

1. Product Cost purchased for resale
 Inventoried until goods are sold
81
2. Period Cost Non-product cost or expensed as incurred
82
41
15/12/2021
Product vs.
Period
Cost
83
Thank you!!!
84
42

1.2 - Introduction To Management Accounting & Recent Developments

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1.2 - Introduction To Management Accounting & Recent Developments

Uploaded by

Copyright:

Available Formats

15/12/2021

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

THIS MATERIAL IS INTENDED FOR

Do not share this in any

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

INTRODUCTION AND CONCEPTS TO

PROF. GRACE A. PADIERNOS, CPA, CMA

• It is the process of identifying, measuring,

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

• Decision making is the process of making

• Setting of immediate, as well as long-

PROF. GRACE A. PADIERNOS, CPA, CMA

• It is the management function which

PROF. GRACE A. PADIERNOS, CPA, CMA

• The organization operates in the

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

• Feedback is also used by managers to

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

• Involves a system of reporting that is

PROF. GRACE A. PADIERNOS, CPA, CMA

• Design and development of the overall

PROF. GRACE A. PADIERNOS, CPA, CMA

• Management accountants should be

PROF. GRACE A. PADIERNOS, CPA, CMA

• Management Accountants assure the

PROF. GRACE A. PADIERNOS, CPA, CMA

• Includes the development and

PROF. GRACE A. PADIERNOS, CPA, CMA

STANDARDS OF ETHICAL CONDUCT FOR

PROF. GRACE A. PADIERNOS, CPA, CMA

• Maintain an appropriate level of professional competence by ongoing development of

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

• Communicate information fairly and objectively.

PROF. GRACE A. PADIERNOS, CPA, CMA

Accounting • Tax Accounting

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

Financial Cost Management

PROF. GRACE A. PADIERNOS, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

Frequency of As needed Periodic (annually)

Emphasis Relevance & timeliness Objectivity, Reliability & Precision

Financial Guiding principles Needs of management Generally Accepted Accounting

Accounting Requirements Optional

Purpose Decision-making Reporting

PROF. GRACE A. PADIERNOS, CPA, CMA

The departments in a company can be viewed as having either of the

A line department is directly involved in providing goods or services

VS. • Senior Vice President—Callaway Brand

PROF. GRACE A. PADIERNOS, CPA, CMA

Line position involved in the provision of goods

VS. Examples CEO, COO, Plant manager, Plant

PROF. GRACE A. PADIERNOS, CPA, CMA