Objectives, role and scope of management accounting
1 Basic Management Function (PDC)
Planning - establishing strategy, slecting course of action and specifying how the actions will be
implemented. (Short and long term obj, resources/tactics needed to achive plan, decide alternatives)
Directing - mobilizing people to carry out plans (take actions to implement the plan)
Controlling - ensuring that the plan is actually carried out and is appropriately modiffed as
circumstances change.
2 Financial accounting vs Managerial accounting
Financial accounting Management Accounting
User External users Exclusive - internal users
Reports FS Monetary and nonmonetary reports
Guiding Principles GAAP What MGT wants and needs
Nature of information Objective, reliable and historical Subjective, relevant, and future oriented
Time orientation Historical data Future oriented using current and past data
Frequency Periodically When needed
Level of detail Focus on business as a whole Extensive and detailed
Sources of data Internal information system Internal and external sources
3 Controller vs Treasuer
Controller - Chief Management Accounting - responsible for the accounting aspect of management control
Treasusrer - resonsible for raising capital, safeguarding asset, management of investment, credit policy and insurance
Controller Treasurer
Planning and control Provision of capital
Reporting and interpreting Investor relations
Evaluating and consulting Short-term financing
Tax adminstration Banking and custody
Government reporting Credit and collections
Economic appraisal Investment
Insurance
4 International Certification in Management Accounting
Professional ethics
1. Competence - expertise
2. Confidentiality - except when authorized or legally required
3. Integrity - mitigate conflict of interest, abstain from activities that might discredit the profession
4. Credibility/Objectivity - communicate fairly and objectively
5 Other factors
Management by objectives - a procedure in which a subordinate and supervisor agree on goals and
methods of achieving them and develop a plan
Management by exception - highlighting those which vary significantly from plans and standards
Line vs staff
Line -downward authority Staff - advise or support
Standard Costing
Standard Costing
Standard - benchmark or norm used for planning and control. It specifies expected costs and quantities
needed to manufacture a single unit of product or perform a single service.
Standard cost system - determines product costs using standards for quantities and/or prices.
Quantity Standard - normally expressed per unit of output
Price standard - normally expressed per unit of input
Advantages of using Standard cost system
1. Clerical efficiency
2. Motivation It sets expectation of efficiency to workers
3. Planning Can be used to estimate future quantities and costs
4. Controlling measurement of variances
5. Decision making
6. Performance evaluation
Budgets vs Standards
Variances
DM Price Variance, Price Usage Variance, Quantity Variance
ance Price - Purchasing manager
Quantity - Production manager
Labor - Price and Quantity Variance
Price, Mix and Yield Variance
AAASSS or AQAP formula
Actual Mix AQ AP
Price
Actual Mix AQ SP
Standard Mix AQ SP Mix
Standard Mix SQ SP Yield
Mix - Substituting a substandard mix of materials/changing the proportiante amount of higher/lower paid workers
Yield - Shows impact of using more or fewer quantity/hours than standard allowed.
AFOH Spending Variance Controllable or Flexible
BAAH Efficiency Variance/VEV Budget Variance
BASH Volume Variance/FVV
SHSR
workers
