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Introduction To Management Information

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6 views

Introduction To Management Information

Uploaded by

kundiarshdeep
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Introduction to

management
information
Introduction

• This chapter looks at management information:


– its purpose,
– sources,
– categories,
– desirable qualities and
– potential problems
– role of a trainee accountant
Data and information
What is data?
• Data is a 'scientific' term for facts, figures, and
measurements.
• Data are the raw materials for data processing.
• Information is data that has been processed in such a
way as to be meaningful to the person who receives it.
• Information is anything that is communicated
• Management is the term used for the people in charge of
running a business (managers) or other organisation
• Management information can therefore be described as
information that is given to the people who are in charge of
running an organisation
• Management information is often classified into two types:
– Financial information (measured in terms of money)
– Non-financial information (not measured in terms of money)
The purpose of management
information
• Management information is used by managers to;
– Plan the future of the business. For example, future cash
flows and whether borrowing will need to be arranged;
whether more employees need to be recruited.
– Control the progress of the business. For example whether
budgets set in the planning stage will be met.
– Decision making. For example, what to produce or which
branch to close
MA compared with FR
Question 1

What are the three purposes, for which managers use


management information?
A. Estimating, investigating and planning
B. Planning, controlling and decision-making
C. Controlling, buying and selling
D. Accounting, manufacturing and auditing
Question 2

Which of the following is/are information rather than simply


data?
1. A random list of the wages of all employees.
2. A list of all stock items that haven’t sold at all in the last three
months.
3. A report showing where expenses are 10% or more over budget.
4. A list of all invoices that have been paid by the company

A. 1 and 4 only
B. 2, 3 and 4 only
C. 2 and 3 only
D. All items are information rather than just data
Question 3

Which of the following is characteristic of cost and


management accounting rather than external financial
reporting?
1. Format and content strictly controlled.
2. Backwards looking only.
3. Often contains estimates about the future.
4. Must be audited
A. 1, 2 and 4 only
B. 2 and 4 only
C. 1, 3 and 4 only
D. 3 only
The features of useful mgt.
information
• The features of good management information are often
described and remembered using the word ‘ACCURATE’.
• Accurate. Certainly accurate enough for managers to use
confidently. Some managers need information accurate to the last
cent whilst other are happy with accuracy to the nearest $1,000.
• Complete. ! Missing information can be very serious. For
example, omitting a cash outflow that will happen next month
could be fatal for a business.
• Cost-benefit. There is little point having information which
costs more to provide than any benefit that arises from it.
• User-targeted. The information should be what users need.
For example, senior managers often have to be planning for
the future so need forward-looking information.
• Relevant. Too much information causes information
overload and might mean that important matters are
overlooked.
• Authoritative. What is the information’s source and
reliability? Just because you find something by ‘Googling’
the internet does not mean the information is correct.
• Timely. The information should be received quickly enough
to be of use to the decision-maker. Real-time on-line
systems can speed up the supply of information.
• Easy-to-use. The information should be well-set out and
described.
Sources and categories of
information
• The main sources of information are:
– Internal information
– External information
Internal information;

• Capturing data/information from inside the organisation


involves the following.
– A system for collecting and/or measuring transaction data
for example, sales, purchases, inventory turnover etc.
– Informal communication of information between managers
and staff (for example, by word-of-mouth or at meetings).
– Communication between staff at all levels.
External information

• Capturing information from outside the organisation might


be a routine task entrusted to particular individuals, or
might be collected on an 'informal' non-routine basis.
• Routine formal collection of data from outside sources
includes the following.
– tax specialists
– legal experts
– Research and development (R & D)
– External marketing specialists
The limitations of MA
information
• Potentially all the matters covered by ACCURATE
• Difficulty making future estimates.
• Often quantitative and financial only, but undoubtedly matters
such as quality and customer service levels will be important.
• Can be difficult for manager with no financial training to
understand.
• Often too inward-looking.
Role of a trainee accountant

• Recording transactions. For example, making posting to the


ledgers.
• Extracting information and presenting it for management
use. For example, a comparison of budget and actual figures
for a period.
• Investigating financial matters. For example, looking into an
overrun in a cost.
• Helping with budget preparation.
• Helping and supervising more junior staff

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