Chapter

Introduction to
1 Management
Accounting
Objectives
1. Define management accounting.

2. Define management functions.

3. Understand management accounting role.

4. Compare management accounting and financial

accounting.

5. Understand Management accounting main subject.

6. Define ethical issues.

Contents
1. Definition of managerial accounting
2. Management function in an
organisation
3. Managerial accounting role
4. Managerial accounting vs Financial
accounting
5. Target costing
 Definition of MA

~ According to Peter C. Brewer: “Management

accounting plays a vital role in providing information to
managers in order to carry out three major activities –
planning, directing and motivating, and controlling”.

~ According to Ray H. Garrison: “Managerial

accounting is the phase of accounting concerned with
providing information to managers for use within the
organisation”.
 Definition of MA

According to Vietnam Accounting Law (Chapter 3

Article 4):
Management accounting is the mean of collecting,
processing, analysing and reporting economic information
under the requirement of internal management.
 Definition of MA

There are few things that could be concluded

from the above definitions:
•Management accounting is vary from
organisation to organisation.
•Information need for different management
level would be diverse.
 Management function in an
organisation
Organisation
Planning

Resources Decision
Operations making

Control
Human -ling
 Management function in an
organisation

1. Set objective
2. Find solutions
3. Evaluate solutions
Planning

4. Select solution
5. Put it into action

6. Compare actual vs plan

Controlling
7. Analyse diversion
Management function in an
organisation

Hoạch
Planning
định Determine the
goals of the
organisation
Decision
Ra quyếtMaking
định Set out the strategy
to reach those
goals
Controlling
Kiểm soát
Management function in an
organisation
Planning
Select among
options

Decision Making

Controlling
Management function in an
organisation
Hoạch
Planning
định

Decision
Ra quyếtMaking
định Actual result vs
plan
Adjust the target if
Controlling
Kiểm soát necessary
 Quick check

Which of the following is a controlling act

of management?
a) Set out the overall target.
b) Set out the specific strategy.
c) Determine operational objectives.
d) Evaluate the performance
measurement.
 Managerial Accounting Role

Provide managers with required information as an

assistance mean to carry out their job.
Promote the understanding of employees towards
organisation’s goals.
Evaluate the performance both of manager and
staff.
Evaluate the business’ competitive advantage.
 Managerial Accounting Role

Managerial accounting contributes to:

 Marketing decisions
 Manufacturing decisions
 Financial decisions
 Human resource decisions.
 CFO or CONTROLLER
The top managerial and financial accountant;
with the duties of:
Accounting personnel.
Preparing reports used in both managerial
and financial accounting.
Planning and decision making.
 TREASURER
Treasurer typically is responsible for:
Raising capital.
Safeguarding the organization’s assets.
Managing the organization’s investments, its
credit policy and its insurance coverage.
 INTERNAL AUDITOR
Internal auditor is responsible for
Reviewing the accounting procedures,
records and reports.
Expressing an opinion to top management
about the effectiveness of the accounting
system.
 MA vs FA

Accounting System

Managerial Accounting Financial Accounting

Provide information Provide information
(Management requirement) (Financial statement)

Internal External
users users
 t i ng
ep or
al R
nc i
a
Fin

Fin
anc
ial R
e por
ting
 MA vs FA
Who would use the information from
management accounting system?

 Board of directors
 CEO
 CFO
 Managers (Sales
department)
 Manufacture
Supervisor
 …
 MA vs FA
Managerial Accounting Financial Accounting

Objective Provide information for Provide information

planning, decision about financial
making and controlling performance and
financial position
Report In many forms, Standardised formats
without standardised
format
Users Internal External
Information Historical and future; Historical; Report in
Report in total or in total
segments
 MA vs FA
Managerial Financial
Accounting Accounting
Standard None apply VAS; IFRS or GAAP

Report Unit Department, Organisation as a

Product line or whole
Segments

Report interval Depend on the Monthly, Quarterly

need of or Yearly
management
 Quick check
MA FA

Determine profit for each product line.

Contribute in pricing new product.
Valuate WIP in order to determine the cost of a
unit of production.
Compare actual and standard costs with the aim
to analyse any difference.
Prepare financial reports
Prepare budget for financial performance,
financial position and cash flow.
Track the expenditure for each plant and
department with the aim to evaluate the
performance.
Account for receivable of each customer.
 Target costing

Target
price
- Target
profit
= Target
costing

Customer Investor
Competitor
Business
strategy
 Self research

Institute of Management Accountant-IMA

Publish Organise Develop

Researches in CMA Code of Ethic
MA Program
 Self research

 IMA offers its members access to

the CMA program.
 Web link: www.imanet.org
 Ethical Conduct
Ethical codes of conduct are general
principles and ethical standards of conduct
that guide behaviour of a profession

Do we need to act ethically?

Why? (What would be the benefit for doing
so?)
Ethical Conduct

Competence
Confidentiality
Integrity
Objectivity
 Ethical Conduct
 COMPETENCE:
 Maintain professional expertise.
 Follow laws, regulations, and standards.
 Provide information and recommendations
that are clear, concise, and timely.
 Ethical Conduct
 CONFIDENTIALITY:
 Don’t disclose confidential information
except when authorized or legally required.
 Ensure that subordinates do not disclose
confidential information.
 Do not use confidential information for
unethical or illegal advantage.
 Ethical Conduct
 INTEGRITY:
 Avoid actual or apparent conflicts of
interest.
 Avoid from any conduct that would
prejudice carrying out duties ethically.
 Avoid from actions that discredit the
profession.
 Ethical Conduct
 OBJECTIVITY:
 Communicate information fairly and
objectively.
 Disclose all information that could be
expected to influence a user’s
understanding.
 Disclose delays or deficiencies in
information, processing, or internal
controls.