Management Accounting

Chapter 1
Management Accounting: An Overview
 Definition

Management Accounting

- the process of identification, measurement,

accumulation, analysis, preparation, interpretation,
and communication of financial information, which is
used by management to plan, evaluate and control
activities within an organization.
 Objective

Management accountants are concerned with

providing information to managers, that is, people
inside an organization who direct and control the
operations.
 Scope
• Scorekeeping or data accumulation - which enables
both internal and external parties to evaluate
organizational performance and position.

• Interpreting and reporting of information - helps

manager to focus on operating problems,
opportunities as well as inefficencies.

• Problem-solving - quantification of the relative

merits of possible courses of action as well as
recommendations as to the best procedure.
 Cont...

To help the management in:

• Planning
• Controlling
• Decision making
 Planning

• involves setting goals for the firm

• evaluating the various ways to meet the goals
• picking out what appears to be the best way to
meet the goals
• often expressed formally in budgets (resource
planning) and break-even analysis (profit planning)
 Control
• Accounting control reports - used to inform managers
when activties which are part of their responsibility
are deviating from the plan.

• Performance reports - used to evaluate the

performance of managers and the operations they
control.

Management by exception - investigation of major,

exceptional departures from the plan
 Planning and Control Process

Plan Plan
Implementation
Results

Comparison of
planned and actual
Decision to reward or results
punish manager

Decision to change
operations or revise Evaluation
plans
 Financial Accounting vs Management Accounting

Aspects Financial Accounting Management Accounting

Objective
Compliance
Future
Data relevance and flexibility
Report precision and timeliness
Reporting requirements
Compliance with the law
To provide data for both internal
(management) and external users
In accordance with IFRS
N/A; summaries of past
transaction
All-purpose report with historical
data for use of different users
Precise and useful even if
submitted late
Report on the company as a
whole
Required by law
To provide data for internal users
within the business organization
Compliance with IFRS is not
needed
Future-oriented
Special reports with historical and
projected data for specific users
Timeliness is more important than
precision
Report in parts or segments of the
company
Not mandatory
 Organizational Structure
Financial Reporting
CEO BOD
Systems Development
COO
Budgeting and Performance
Reporting
CFO

Financial Analysis and

Special Studies

Taxation Reporting
Treasurer Controller

Cost Management
 International Certifications

• Certified Management Accountant

• Certified Public Accountant
• Certified Internal Auditor

Organizations:
• Institute of Management Accountants
• Philippine Association of Management Accountants
End of Chapter 1