Management accounting - a set of techniques, processes, and practices designed to assist management

in the formulation and implementation of an organization’s strategy.

Management accountants - are deeply involved in processes related to the identification,

measurement, accumulation, analysis, preparation, interpretation, and communication of the
information needed by management to perform its functions.

Management accounting provides some of the information that helps managers do their jobs.
Information is contained in any fact, datum, observation, or perception that serves either decision-
facilitating or decision-influencing purposes.2 Decision facilitating information improves specific
decisions. It could lead managers, for example, to set better prices, to cut costs productively, or to make
better allocations of resources. Decision-influencing information affects employees’ behaviors in
positive ways.

Operating information provides most of the raw data for management accounting, but much of this
information is not of direct interest to managers. In the normal course of events, a manager does not
care about the amount of money an individual customer owes, the amount an individual employee
earned last week, or the amount deposited in the bank yesterday. Records must be kept of these facts,
but these records ordinarily are used by operating personnel rather than by managers. Management
accounting information is summary information.
CASE 15-1 PRIVATE FITNESS, LLC

Rosemary Worth owned a small business health club, Private Fitness, LLC located in Rancho Palos
Verdes, California for 6 months. She spent $150,000 from own savings and bank loans to renovate the
facility and buy necessary fitness equipment.

Store Hours:
Monday – Friday 5:30AM to 9:00PM
Saturday 6:00AM to 12:00Noon
Sunday 12:00Noon to 3:00PM

Offer:
Personal Training $50 per hour
Slower Times 9-4pm $35 per hour
Student Price $12 per hour
Prepaid Users with discount and no membership

The club was comprised of five areas:

1. an exercise room
2. a room containing aerobic equipment.
3. a room containing weight machines and free weights,
4. men’s and ladies’ locker rooms, and
5. an office.

She contracted 5 instructors, specialize in teaching one or two types of fitness classes. They were paid
on commission, 20-30% of revenue varied depend on experience and referrals.
Kate Hoffman - primary tasks included marketing, facility upkeep, scheduling of appointments, and
record keeping. Kate was paid a salary plus a commission based on gross revenues.
Part time clerical employee – paid hourly wage to staff the front desk.

STATEMENT OF THE PROBLEM

Rosemary Worth needs to look into the feasible procedures and controls that she can utilize to protect
her business assets from internal risks.

STATEMENT OF CASE FACTS

 Rosemary has operation problems and cannot fully commit her time with the business due to
family responsibilities.
 Kate’s primary tasks included marketing, facility upkeep, scheduling of appointments, and
record keeping.

ANALYSIS OF THE CASE FACTS

RECOMMENDATION
Preparation and prevention are very important. A policy outlining the steps to be taken must be in place.
Make sure the subject and the consequences are both addressed in detail in your company policy.
Additionally, make sure every employee is aware of the company policy.
Let employees know that any dishonest acts come with serious consequences. Advise employees that if
they know of another employee’s dishonesty and fail to report it, they can be subject to discipline as
well.