CHAPTER 1

INTRODUCTION TO
MANAGERIAL ACCOUNTING
 SUBTOPICS

Comparision between managerial accounting

1.1 and financial accounting : CLO1

Functions of management and roles of

1.2 accounting information in management :CLO1

Characteristics of managerial accounting

1.3 information : CLO1

1.4 Roles of management accountant: CLO1

Definition of Management Accounting

Management accounting
Is the process of
providing financial information
to internal users to help them
In decision making.
 1.1 Comparison between Managerial
Accounting and Financial Accounting

Financial Management
Accounting Accounting

Internal and Type of user Internal

external

Focus
Focus on the past Focus on future
of report

Special-purpose
General purpose: purpose for specific
Reporting profit/loss of reports decision
 Financial Management
Accounting Accounting

Financial statement; Frequently

Internal reports;
quarterly and Of report
as frequently as needed
annually

Type of financial & non-

financial information financial

Pertains to Pertains to sub-units of the

business as a Content business, product or
whole of reports customer. (very detailed)

Required to conform Need not to conform

with accounting regulation
with accounting
standards standards
1.2 Functions of management

PLANNING

CONTROLLING

DECISION MAKING
 PLANNING

The process of setting

• objectives / goals to be achieved.
• Selection methods / strategies that will
be implemented to achieve the
objectives
 CONTROLLING

Process to ensure
• that the strategy is on the right track
and the goal is achieved or based on
performance evaluation
• Follow-up is made if necessary
 DECISION MAKING

Chose the best alternative

• after an analysis of the costs and
revenues has been made.
• Involved in every operating activities
include planning and control
 1.2 Role of Management
Accounting Information

Decision making

Planning

Budgeting

Stock evaluation

Control and evaluate performance

Determination of cost and prices of

products or services
 1.3 CHARACTERISTICS OF
MANAGERIAL ACCOUNTING
INFORMATION

ACCURACY Must coincide with the needs

of management functions.

Information obtained at the

TIMELINESS time the information is
required if delayed action can
not be done

Using terms that are easily

understood to ensure that the
UNDERSTANDABILITY information obtained can be
used to make informed
decisions.
 accounting information must be capable
RELEVANCE of making a difference in a decision

Benefits of information must outweigh

COST EFFECTIVENESS the cost of providing it.

Information is not necessarily accurate ,

FLEXIBILITY but it is easily adaptable to the needs
decisions to be made
 1.4 ROLES OF MANAGEMENT
ACCOUNTANT

Responsible for carrying out the task of

helping the management.

Provide information and accounting

reports.

Assist departments in achieving the

organization's objectives.
 UPS QUESTIONS

1)Explain three (3) uses of accounting

information to management. (3m)
(2011/2012 session)
2) State three (3) management functions.
(3m)
(2010/2009 session)
3) State three (3) characteristics of
management accounting information.
(2009/2008 session)
 PSPM QUESTIONS

1)State and explain two (2) roles of

management accounting information. Give
one (1) an appropriate example for each
one.
(2006/2007 session)
2)State and explain four (4) characteristics
of management accounting information
(2007/2008 session)
3)State two (2) differences between financial
accounting and management accounting.
(2009/2008 session)