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Mgt Accounting 2

accountancy

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3 views

Mgt Accounting 2

accountancy

Uploaded by

Mark John Eway
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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MANAGERIAL ACCOUNTING

Definition of Managerial Accounting


Key words:

Managerial – relating to management or managers especially of a company or similar organization.

Management – is the coordination and administration of tasks to achieve a goal. Such administration activities include
setting the organization’s strategy and coordinating the efforts of staff to accomplish these objectives through the
application of available resources. Five basic functions of management include: Planning, Organizing, staffing, leading,
and controlling.

Accounting – is the process of recording financial transactions pertaining to a business. The accounting process
includes summarizing, analyzing, and reporting these transactions to stakeholders/owners, oversight
agencies/regulators (i.e., SEC, BIR).

Stakeholder - is a person, group or organization with a vested interest, or stake, in the decision-making and activities
of a business, organization or project.
MANAGERIAL ACCOUNTING

Managerial accounting

- is the practice of using accounting information — from revenues to production inputs and outputs affecting the
supply chain — internally, in support of organization-wide efficiency and for tracking the organization's progress
toward attaining its stated goals.
- Is the type of accounting that provides financial information for managers and decision-makers within a company.
It often involves various financial metrics, including revenue, sales, operating expenses, and cost controls.
- Simply stated: Managerial accounting is about providing information in support of the internal management
processes.

Nature of Managerial Accounting

It is classified as both a science and an art. It is the SCIENCE of ‘quantifying and summarizing’ accounting data as well
as the ART of ‘interpreting” it.
MANAGERIAL ACCOUNTING
Characteristics (essential qualities) of Managerial Accounting:

1. Providing Financial Information


The primary goal of management accounting is to deliver financial data to executives. The data is presented in a
format that allows various levels of management to review policies and make decisions.
2. Cause and Effect Analysis
A technique that helps you identify all the likely causes of a problem. This means that you can find and fix the main
cause, first time around, without the problem running on and on.
The cause and effect of the facts and numbers on which management is based is examined. For instance, if there
are losses, the causes of the losses are examined. And if profit is made, variables that influence profit are examined
as well. To draw suitable conclusions about the effect of those elements on profit, the quantity of profit is compared
to expenditure, sales, capital used, and so on.
MANAGERIAL ACCOUNTING
Characteristics (essential qualities) of Managerial Accounting 

3. Use of Special Techniques and Concepts.

Standard costing, budgetary control, marginal costing, fund flow, ratio analysis, and other techniques are used in
management accounting to make accounting data more usable and beneficial to management. Each of these
techniques or concepts is valuable to a certain goal, such as data analysis and interpretation, establishing
operational control, and so on.

4. Decision Making
Management accounting offers relevant data to management in order for them to make important decisions.
MANAGERIAL ACCOUNTING

Functions of Management Accounting

1. Decision Making

The most important goal of management accounting is decision making. Managerial decisions are critical and play
on important role in determining the future of a company. If the managers of the organization are well-educated
on the financial health of the company, then they can make more efficient decisions.

2. Planning

One of the most significant roles of management accounting is to supply the necessary data and information for
creating short- and long-term projections and managing operations.
MANAGERIAL ACCOUNTING
Functions of Management Accounting

3. Coordinating
The management accountant improves an organization’s efficiency and profits by providing various coordination
tools such as budgeting, financial reporting, financial analysis and interpretation, and so on. It aids management by
reconciling cost and financial records, preparing budgets and establishing standard costs, and analyzing cost
deviations to enable management by exception.
(N.b. Management by exception (MBE) is a workplace practice that allows employees to work more independently
and only involve their managers on specific issues or “exceptions” to normal operations.)

4. Financial Analysis and Interpretation


The management accountant analyses the data and presents it to management in a non-technical manner, together
with his comments and ideas, so that the owners and senior management employees can understand it and make
informed, relevant and timely decisions.
MANAGERIAL ACCOUNTING

TO SUM IT UP:

Management accounting is the presentation of accounting data in a way that it AIDS management in policy
development and day-to-day operations of a business. The primary goal of management accounting is to deliver
financial data to executives. Management accounting is a type of accounting which aids management in making sound
company decisions.
MANAGERIAL ACCOUNTING
FINANCIAL ACCOUNTING
It is the process of recording, summarizing , and reporting a company’s business transactions through financial
statements. These financial statements, namely: 1. Balance Sheet; 2. Income Statement; 3. Cash flow Statement and 4.
Statement of Retained Earnings, - vastly aid the business or an organization in assessing its financial health and
stability.

Table 1.1 Comparison of Financial and Managerial Accounting


Criteria Managerial Accounting Financial Accounting
Users Inside the organization Both Inside and Outside the
organization

Accounting rules None IFRS or International Financial


Reporting Standards (Used to be
U.S. Generally Accepted
Accounting Principles/GAAP).

Time horizon Future projections (sometimes Historical information


historical if in detail)
MANAGERIAL ACCOUNTING
Table 1.1 Comparison of Financial and Managerial Accounting

Criteria Managerial Accounting Financial Accounting


Level of detail Often presents segments of an Presents overall company
organization (e.g., products, information in accordance with
divisions, departments) IFRS.

Performance measures Financial and nonfinancial Primarily financial


MANAGERIAL ACCOUNTING
Organizational Structure
Figure 1.1 "A Typical Organization Chart" is a typical organization chart; it shows how accounting and finance personnel
fit within most companies. The personnel at the bottom of the chart report to those above them. For example, the
managerial accountant reports to the controller. At the top of the chart are those who control the company, typically
the board of directors (who are elected by the owners or shareholders).
MANAGERIAL ACCOUNTING
Key Finance and Accounting Personnel and its corresponding functions
Chief Financial Officer
The chief financial officer (CFO) is in charge of all the organization’s finance and accounting functions and typically
reports to the chief executive officer.
Controller
The controller is responsible for managing the accounting staff that provides managerial accounting information used for
internal decision making, financial accounting information for external reporting purposes, and tax accounting
information to meet tax filing requirements. The three accountants the controller manages are as follows:
Managerial accountant
The managerial accountant reports directly to the controller and assists in preparing information used for decision
making within the organization. Reports prepared by managerial accountants include operational budgets, cost estimates
for existing products, budgets for new product lines, and profit and loss reports by division.
Financial accountant
The financial accountant reports directly to the controller and assists in preparing financial information, in accordance
with International Financial Reporting Standards for those outside the company. Reports prepared by financial
accountants include a report filed with the Securities and Exchange Commission.
MANAGERIAL ACCOUNTING
Key Finance and Accounting Personnel and its corresponding functions
Tax accountant
The tax accountant reports directly to the controller and assists in preparing tax reports for governmental agencies,
including the Bureau of Internal Revenue.
Treasurer
The treasurer reports directly to the CFO. A treasurer’s primary duties include obtaining sources of financing for the
organization (e.g., from banks and shareholders), projecting cash flow needs, and managing cash and short-term
investments.
Internal Auditor
An internal auditor reports to the CFO and is responsible for confirming that the company has controls that ensure
accurate financial data. The internal auditor often verifies the financial information provided by the managerial, financial,
and tax accountants (all of whom report to the controller and ultimately to the CFO). If conflicts arise with the CFO, an
internal auditor can report directly to the board of directors or to the audit committee, which consists of select board
members.
MANAGERIAL ACCOUNTING

End of discussion.

Questions/clarifications.

Prepare for surprise quiz.

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