MANAGEMENT ACCOUNTING De La Salle - Professional Schools, Inc. Graduate School of Business Taft Campus Module 1 The Nature of Management Accounting (From Accu: estan Cas Aon, Haskins aad Meat 18 Eon) Topic Outline = Define Accounting = Describe the Specialized Fields of Accounting = Compare and contrast management accounting information from financial accounting information = Describe the three main uses of management accounting information MANACC-MODULE 1 n2Definition of Accounting Accounting is the art of recording, classifying, and summarizing in a chronological order, transactions and events that are in part at least of a financial character, and interpreting the results thereof. (Traawonat Definition) Accounting is the process of identifying, measuring, and ‘communicating economic information to permit informed |__ judgments and decisions by users of the information. ‘American Accounting Association) [BCC LDP MANACC- MODULE 1 3 Underlying Purpose of Accounting Accounting provides financial information about an economic entity, i.e., a business enterprise. BOC LMDP WANACC- MODULE 1 4 134Users of Accounting Information = Internal Users > Board of Directors > Managers > Employees = External Users > Investors > Creditors > Governmental Agencies > General Public > Other interested parties BOC LMDP MANACC- MODULE Specialized Accounting Fields ® Financial Accounting = Management Accounting ‘BOC LMDP MANACC-MODULE 1 156What is Financial Accounting? . «+ primarily concerns itself with producing financial records and reports that are evidenced by the necessary supporting documents. The financial accountant assures management and third parties that the entity's financial records and reports fairly represent the status and profitability of the business. [ROC LMDP MANACE-MODULE 1 7 What is Management Accounting? . . is the process within an organization that provides information used by management in planning, implementing, and controlling the organization's activities. This process includes the identification, measurement, accumulation, analysis, preparation, interpretation, and communication of the information needed by management to perform its functions. (Definition of Management Accounting, IMA Statement No. 1A) BOG LMOP MANACC-MODULE 1 2 178Similarities of Management Accounting | and Financial Accounting = Most elements of financial accounting are also found in management accounting = Both used the same accounting documents and records = Both are used in decision making BOC LDP MANACC-UODULE 1 1" Purposes and Uses of Management | Accounting Information Purpose Uses: Uses: | Historical Data Future Estimates. Measurement ‘Basis for extemal reporting | Normal pricing decisions Analyzing economic, performance Cost-type contract payments Contrar ‘Analyzing managerial ‘Strategic planning performance Motivating and rewarding | Budgeting managers None ‘Shortrun decisions ‘Capital budgeting BOC LDP MANACC-MODULE 1 2 111612Management Accounting Contrasted with Financial Reporting Dimonsion Management Accounting | Financial Accounting Nocevsty Optional Required Purpose [Ameane tothe endof | Preducs statements for | assisting management | outside users Uses Ralaiively small 'oup, | Relatively large group, known identity mostly unknown 7 Underlying stucture | Varies according to use oF [Ona basis accountng the information equation: A= L+E ‘Source ofprincples | Whatever is useful io | GAAP management 7 Time orientation | Histovcal and estmales of | Fistorcal the Rive 80C LMP MANACE-AMODULE + ° Management Accounting Contrasted with Financial Reporting Dimension Management Accounting | Financial Accounting Information content| Monetary and nonmonetary | Primarily monetary T Information precision | Many approximations Fever approximations T Report Fequency | Varies with purpose: ‘Quarterly: annually monthly and weakly T Report timeliness | Reports issued promptiy | Delays of weeks or even after end of period ‘months: T Report entity Responsibility centers ‘Overall organization | Tiabity potential | Virtuallynone: Threat is always present BOC LMOP MANACC-MODULE 1 o | 19-10