01

LECTURE 1
The introduction of
Management Accounting

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
 02

Teaching information
10 lectures – 5 weeks Performance evaluation
Lecture 1: The introduction of Management Accounting
Lecture 2: Cost and Cost behaviour
Lecture 3: Accounting for Inventory
Lecture 4: Accounting for Labour
Lecture 5: Accounting for Overheads
Lecture 6: Marginal and Absorption Costing
Lecture 7: Relevant Costing
Lecture 8: Job, Batch, and Process Costing
Lecture 9: Service and Operation Costing
Lecture 10: Revisions
Attendence:
• Mỗi buổi đi học được 1 điểm chuyên cần
Group assignment • Không được vắng quá 3 buổi học (nếu vắng quá 3 buổi
• Mỗi tuần, sinh viên sẽ được giao 1 bài tập nhóm. Các bài sẽ không được thi cuối kỳ)
tập này có thể được trình bày dưới dạng file word, slide, • Không sửa điểm, xin điểm dưới mọi hình thức
hoặc video clip. Khuyến khích sự sáng tạo giữa các nhóm • Sẽ có điểm thưởng nếu trong quá trình học có các sáng
• Đây là các bài tập tính toán, hoặc các bài tiểu luận tìm kiến đóng góp cho giảng viên và lớp học MSc. Pham Tu Anh
hiểu về một vấn đề trong Kế toán quản trị. • Tự phân nhóm và hoàn thành danh sách nhóm vào
Visiting Lecturer in Management
• Điểm bài tập nhóm sẽ được cộng dồn và chia trung bình trước buổi học thứ 3 thông qua link: https://....
Accounting and Financial Accounting in
Accounting and Finance in VLU
Email: funnydonkey520@gmail.com
Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
 1. Learning objectives 03

Upon completion of this chapter, you will be able to:

- Describe the difference between data and information.

- Explain, using ACCURATE acronym the attributes of good information.
- Describe, in overview, the managerial process of planning, decision making and control.
- Explain the characteristics and differences between cost, profit, investment and revenue centres.
- Describe the different information needs of managers of cost, profit, investment, and revenue centres.
- Describe the purpose and role of cost and management accounting within an organization’s management
information system.
- Compare and contrast, for a business, financial accounting with cost and management accounting .

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
 2. Data and information 04

Data Information

Information is data which has been processed in such a

Data means facts.
way that it is meaningful to the person who received it
(for making decisions).
Data consists of numbers, letters, symbols, raw facts,
events, and transactions which have been recorded but
As data is converted into information, some of the detail
not yet processed into a form suitable for use.
of the data is eliminated and replaced by summaries
which are easier to understand.

 In management accounting practice, information is provided to management to assist them with planning, making decisions, and
controlling.

 Management decisions are likely to be better when they are provided with better quality information.

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
 2. Data and information 04

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
Question : 04

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
The nature of good 05

information “ACCURATE acronym”

 A: Accurate
 C: Complete
 C: Cost-effective
 U: Understandable
 R: Relevant
 A: Accessible
 T: Timely
 E: Easy to use

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
Question: 04

Question:

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen

3. The managerial processes
Planning
• Planning involves establishing the
objectives of an organisation and
formulating relevant strategies that
can be used to achieve those
objectives.
• Planning can be either short­term
(tactical planning) or long­term
(strategic planning).
• Planning is looked at in more
detail in the next section of this
chapter.
Van Lang University
Decision making
• Decision making involves
considering information that has
been provided and making an
informed decision.
• In most situations, decision
making involves making a choice
between two or more alternatives.
• The first part of the decision-
making process is planning.
• The second part of the decision-
making process is control.
. produced largely for control
Faculty of Accounting and Auditing
06
Controlling
• Control is the second part of the
decision-making process.
Information relating to the actual
results of an organization is
reported to managers.
• Managers use the information
relating to actual results to take
control measures and to reassess
and amend their original budgets
or plans.
• Internally sourced information,
purposes, is called feedback.
Prepared by Lan Nguyen
Example 1
 Strategic, tactical, and operational 08

planning
Senior managers formulate long-term
Strategic planning objectives (goals) and plans
(strategies) for an organization.

Senior managers make short-term

Tactical planning plans for the next year.

All managers (including junior

managers) are involved in making day
to day decisions about what to do
Operational planning next and how to deal with problems
as they

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
Question:

Question:
 4. Responsibility Accounting 09

 Responsibility accounting is based on identifying individual parts of a business which are the responsibility of a manager.

 A responsibility centre is an individual part of a business whose manager has personal responsibility for its performance. The main
responsibility centres are:

Cost centre Revenue centre Profit centre Investment centre

a production or service
location, function, activity or
item of equipment whose
costs are identified and
recorded.
a part of the organisation that
earns sales revenue. It is
similar to a cost centre, but
only accountable for
revenues, and not costs.
a part of the business for
which both the costs incurred
and the revenues earned are
identified.
Managers of investment
centres are responsible for
investment decisions as well
as decisions affecting costs
and revenues.

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen

Cost object, cost unit, and cost centre
Cost object
• A cost object is any activity for
which a separate measurement of
cost is undertaken
• Example: cost of a product, cost of
a service, cost of running a
department
Van Lang University
Cost unit
• A cost unit is a nut of product or
service in relation to which costs
are ascertained
• Example: cost for a room in a
hotel, cost for a litre of paint in a
paint manufacturer, cost per
patient in a hospital)
Faculty of Accounting and Auditing
10
Cost centre
• Cost centre is a production or
service location, function, activity
or item of equipment for which
costs can be ascertained
• Example: cost for running a
department, cost for running a
machine, cost for running a
project, cost for operating a ward
in a hospital
Prepared by Lan Nguyen

Differences between Cost centre and Cost unit
Cost centre
Definition A cost centre is a type of responsibility centre that is called
accountable for the incurrence of the costs, which are under its
control. It indicates any part of the organization i.e. product or
service location, activity, person, function or item whose cost is
assigned to the cost units, for accounting purposes. It is the small
part of the organization for which specific cost collection is sought.
Measurement Simply put, cost centre indicates a conducive unit of the
organization, into which the entire factory is aptly divided for the
purpose of costing, wherein each unit comprises the department,
equipment, item, machinery, etc.
Example Cost incurring in Accounting department
Cost incurring in Sale department in a month
Cost incurring during process A (shirt manufacturer)
Cost incurring for product B (blue pens, red pens)
Van Lang University Faculty of Accounting and Auditing
08
Cost unit
Cost unit is said to be the unit of product, service,
activity, time or combination thereof, in connection to
which costs are determined. While preparing cost
statements and accounts, a specific measurement unit is
required to be chosen, so as to identify the expenses
accurately and allocate the cost conveniently and in this
way, cost unit comes into the picture.
Cost units are units of physical measurement such as area,
weight, volume, value, time or number, which are to be
chosen to facilitate comparison amidst standard cost and
the actual cost of the product or service.
Steel – Ton, Oil - Liter, Gallon
Automobile - Number
Chemical - Liter, kilogram, ton, etc.
Power/Electricity - Kilo-watt hour (kWh)
Transport - Kilometer
Hotel - Room
Hospital - Patient/day
Prepared by Lan Nguyen
 5. Financial Accounting, 11

Cost Accounting,
and Management Accounting
1. Financial accounting involves recording the financial transactions of an organization and summarizing them in
periodic financial statements for external users who wish to analyze and interpret the financial position of the
organization.
2. Cost accounting is a system for recording data and producing information about costs for the products produced
by an organization and/or the services it provides. It is also used to establish costs for particular activities or
responsibility centers.
3. Management accounting has cost accounting at its essential foundation. The main differences between
management accounting and cost accounting are as follows:
• Cost accounting is mainly concerned with establishing the historical cost of a product/service.
• Management accounting is concerned with historical information, but it is also forward-looking. It is
concerned with both historical and future costs of products/services. (For example, budgets and forecasts).
• Management accounting is also concerned with providing non­financial information to managers (Balanced
Scorecard).
• Management accounting is essentially concerned with offering advice to management based upon
information collected (management information).
• Management accounting may include involvement in planning, decision making and control.

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
 12

Differences between Financial Accounting and

Management Accounting
Management Accounting Financial Accounting
Users Internal External
Managers and Employees Shareholders, investors, creditors, lenders, banks, governments

Purpose Planning, decision making, and controlling Reporting financial performance in a period or/and the financial
position at the end of that period

Legal requirements None Must have

Formats Managers decide on the information they require and the Format and content of financial accounting information should
most useful way of presenting it follow ACCOUNTING STANDARDS AND COMPANY
LAWS to give a true and fair view

Nature of Both Financial and Non-Financial Information Mostly financial

information
Time period Historical and FORWARD-LOOKING Mainly an historical record

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen
Question:
What is the purpose of Management information? (Easy)
A. Planning only
B. Planning and controlling only
C. Planning, control, and decision making only
D. Planning, control, decision making, and research and development .

Question:
Which of the following are suitable measures of performance at the strategic level? (Medium)
(1) Return on investment
(2) Market share
(3) Number of customer complaint
A. 1 and 2
B. 2 only
C. 2 and 3
D. 1 and 3
 Question 1:
Test 1 – Deadline 13

Define and compare the differences between cost unit, cost centre, and cost objective.
Suggest appropriate cost unit, cost centre, revenue centre, profit centre, and investment centre for the following businesses and give explanations for your
suggestions.
a. A car manufacturer
b. Cigarette manufacture
c. A builder
d. An auditing firm
e. Van Lang university

Question 2:
What are the differences between data and information? What makes good information? Give examples for each answer

Question 3:
Critically evaluate the differences between financial accounting and management accounting.

Question 4:
Critically evaluate the role of and Management Accounting in running a business (What is management accounting information used for? Does
Management Accounting really help managers run a business or it is a fad?)

Reference:
1. Johnson, H. T., & Kaplan, R. S. (1987). The rise and fall of management accounting [2]. Strategic Finance, 68(7), 22.
2. Chapman, C. S., Hopwood, A. G., & Shields, M. D. (Eds.). (2006). Handbook of management accounting research. Elsevier.

Van Lang University Faculty of Accounting and Auditing Prepared by Lan Nguyen