Chapter 1  Management Accounting: An Overview

0. 7yste
7ystem
m o!je
o!jecti
ctive
vesC
sC c, h, l

%ro&le' 3 (ole
(ol e o0 Mana*e'ent A##ountants/

 Planning . +he management accountant gains an understanding of the impact

on the organi%
organi%atio
ation
n of planned
planned transactions
transactions 'i.e.,
'i.e., analy%i
analy%ing
ng strength
strengthss and
wea$nes
wea$nesses
ses(( and econo
economic
mic events,
events, !oth strategic and tactical,
tactical, and sets
o!taina!le
o!taina!le goals for the organi%ation
organi%ation.. +he developm
development
ent of
of !udgets is an
e"ample of planning.

Controlling . +he management

management accountant
accountant ensures
ensures the integrity
integrity of financial
financial
information, monitors performance against !udgets and goals, and provides
information
information internally
internally for decision
decision ma$ing.
ma$ing. &omparing
&omparing actual performance
performance
against !udgeted performance and ta$ing corrective action where necessary is
an e"ample of controlling. Internal auditing is another e"ample.

 Evaluating Performance
Performance.. +he management
management accountant
accountant judges and
and analy%es
the implication of various past and e"pected events, and then chooses the
optimum
optimum course of action.
action. +he managemen
managementt accountant also translates data
data
and communicates
communicates thethe conclusions
conclusions.. ;raphical analysis 'such
'such as trend, !ar 
charts, or regression( and reports comparing actual costs with !udgeted costs
are e"amples of evaluating performance.

 Ensuring Accountability of Resources

Resources . +he manag
managem
emen
entt acco
accoun
untan
tantt
implemen
implements ts a reporting
reporting system closely
closely aligned to organi%ational
organi%ational goals that
contri
contri!ut
!utee to the
the measur
measurememen
entt of the the effe
effecti
ctive
ve use of resou
resource
rcess and
safeguarding
safeguarding of assets. Internal reporting such as comparison
comparison of actual to
 !udget is
is an e"ample of accounta!ility
accounta!ility..

 External Reporting . +he

+he manag
managememen
entt accounta
accountant
nt prepares
prepares report
reportss in
accord
accordan
ance
ce with
with gene
genera
rall
lly
y accept
accepted
ed accou
accounti
nting
ng princ
princip
iple
less and
and then
then
disseminates this information to shareholders, creditors, and regulatory ta"
agencies.
agencies. #n annual report
report or a credit application
application are e"amples
e"amples of e"ternal
e"ternal
reporting.

%ro&le'  (Line 4ersus Sta00/

Gamie @eyes is staff. 7he is in a support role  she prepares reports and helps
e"plain
e"plain and interpr
interpret
et them. Her role is to help the lineline managers
managers more
effectively carry out their responsi!ilities.

7tephen 7antos is a line manager. He has direct responsi!ility for producing a

garden
garden hose.
hose. &learly
&learly,, one of the !asic o!jectiv
o!jectives
es for the e"isten
e"istence
ce of a

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