MANAGEMENT ACCOUNTING I

CHAPTER I
Management the process of planning, organizing, and controlling a certain task to
realize the
objectives of the organization
BASIC FUNCTIONS OF MANAGEMENT
1. Planning
- Setting immediate and long term objectives
- Setting goals and selecting strategies
- Budgeting is generally used to describe this part of the planning process.
2. Organizing or (Executing)
- Deciding how to utilize available resources as plans are carried out
- Involves activities such as Staffing, Subordinating, Directing and Motivating
3. Controlling
- Comparing actual performance with set plans or standard
- Deciding what corrective actions to take should there be any deviation
(variance).
- Feedback signals whether operations are on track, is the key to effective
control. One of the reports which compares budgeted to actual results, is called
a performance report .
*Decision Making is an inherent function of management.
MANAGEMENT ACCOUNTING
- an application of appropriate techniques and concepts in processing historical
economic data of an entity to assist management in establishing plan to meet
economic objectives and in making rational decisions with a view toward
achieving the objectives.
- A branch of accounting that provides information to management in making
decisions in order to achieve their objectives.
MANAGEMENT BY OBJECTIVES VS. MANAGEMENT BY EXCEPTION
Management by Objectives is a procedure in which a subordinate and a
supervisor agree on goals and the methods of achieving them and develop a plan in
accordance with that agreement. The subordinate is then evaluated with reference to the
agreed plan at the end of the period.
Management by Exception is a technique of highlighting those which vary
significantly from plans
and standards in line with the management principle that executive time should be spent
on items that are non-routine and are identified as top priority. Also called Management
by Variance.
MANAGEMENT ACCOUNTING VS. FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
1.
2.
3.
4.
5.

User of information
Guiding Principles
Optional/Mandatory
Type of Information
Emphasis of reports

6. Purpose
7. Source of data

Primarily for external users

GAAP
Mandatory
Primarily monetary
Reliability (precision of data)
Financial reporting &
compliance
Internal Sources

MANAGEMENT
ACCOUNTING
Exclusively for internal users
Management wants & needs
Optional
Monetary and non-monetary
Relevance (timeliness of
data)
Decision making
External and Internal

8. Amount of detail
9. Focus of information
10.Frequency
11.Time Orientation
12.Unifying model
(Formula)

Compressed and simplified

Focus on business as a
whole
Periodic (annually,
quarterly)
Historical Data
Assets = Liabilities +
Capital

sources
Extensive and detailed
Segments or Business as a
whole
As frequent as need arises
Current and Historical data
No Unifying Model or
equation

THE CONTROLLER: CHIEF MANAGEMENT ACCOUNTANT

CONTROLLERSHIP the practice of the established science of control, which is the
process by which management assures itself that company resources are obtained and
utilized according to plans that are in line with the companys set objectives.
CONTROLLER an officer of an organization who has responsibility for the accounting
aspect of management control. It is often referred to as the chief accountant.
CONTROLLER
FINANCIAL
ACCOUNTING
ACCOUNTING &
SYSTEMS
PROCEDURE
GOVERNMENT &
TAX REPORTING

COST &
MANAGEMENT
ACCOUNTING
FINANCIAL
ANALYSIS &
SPECIAL STUDIES

ORGANIZATIONAL STRUCTURE
- It refers to the method of how a business organization put together its people
and their respective positions that will result in the most effective and efficient
operations.
- The two types of organizational structure are:
a. Centralized decision making is exclusive to one person or group of person.
b. Decentralized decision making is delegated to the lowest possible
managerial position.
LINE FUNCTION VS. STAFF FUNCTION
a. Line Function the authority to give command or orders to subordinate. It
exercises direct downward authority over line departments. They are directly
involved in achieving the basic objectives of an organization.
b. Staff Function the authority to advise but not to command others; the function
of providing line and staff managers with specialized service and technical advice
for support. It is exercised laterally or upward.
CONTROLLER VS. TREASURER
CONTROLLER
Planning and Control
Reporting and Interpreting
Evaluating and Consulting
Tax administration
Government reporting
Protection of assets
Economic Appraisal

TREASURER
Provision of Capital
Investor Relations
Short-Term Financing
Banking and Custody
Credit and collections
Investments
Insurance

STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS

COMPETENCE

CONFIDENTIALITY

INTEGRITY

Maintain appropriate

Information must not be

Mitigate conflict of

CREDIBILITY/OBJEC
TIVITY
Communicate

level of expertise
Perform duties in
accordance with relevant
laws, regulations and
technical standards
Provide information that
are accurate, clear,
concise, and timely.
Recognize and
communicate
professional limitations.

disclosed unless
authorized, legally or
professionally required
Inform relevant parties
about the level of
confidentiality of
information
Do not use information for
unethical or illegal
advantage.

interest

information fairly and

objectively

Avoid conduct that will

prejudice carrying out
duties ethically

Disclose all relevant

information for decisionmaking

Abstain from
engagements that may
discredit profession
Also called Internal
Honesty

Disclose delays and/or

deficiency in information
Also called External
Honesty