Introduction to

Management
Accounting
-JOHN MARK TUAZON
Management
- is the process of doing different activities in achieving organizational objectives. This involves
planning, organizing, leading, controlling.

Management Accounting
- focuses on the information needs of an organization’s internal managers that are related to
their planning, controlling, and decision-making functions.
What is the role of accountants in
management?
- Accountants develop and communicate much of the economic information
used by managers of businesses and other economic organizations as external
users.

- Information provided to internal users are called management accounting

information, and are done by management accountants.
Planning is setting goals and developing strategies and tactics to achieve
them.

Controlling is determining whether goals are being met, and if not, what
alternative courses of actions can be done.

Decision making is selecting one alternative from a set of choices.

Objectives of Management Accounting
- Providing managers with information for decision making and planning.
- Assisting managers in directing and controlling operations.
- Motivating managers toward achieving organization’s goals.
- Measuring performance of managers and sub-units within the organization.
What does accounting information
supposed to do?
- To provide information to external parties for investment and credit purposes.

- To estimate the cost of products produced or services rendered.

- To provide information useful for making decisions and controlling operations

Financial Accounting is the field of accounting the develops information for external
decision-makers such as stockholders, suppliers, banks, and government regulatory
agencies.

Management Accounting – as defined earlier, is more concerned with individual

segments of the business rather than the organization as a whole, so management
accounting information normally addresses specific concerns rather than the “big
picture of financial accounting.
Cost Accounting
- The bridge that connects and interlinks management and financial accounting.
- It is the field of accounting that creates an overlap between financial accounting and
management accounting
- Focuses primarily on the determination of the cost of making products or performing services.
- Determines the cost of products or services.
 Accounting System

Cost Accounting System

Management Accounting Financial Accounting

Internal Users of External Users of

Information Information
Management Accounting vs Financial Accounting
- Internal Users - External Users
- Not required and unregulated since it is - Required and must conform to GAAP or
intended only for management. other standards.
- The organization’s basic accounting system - Data are drawn almost exclusively from the
plus various other sources, such as external organization’s basic accounting system which
information. accumulates the financial information.
- Reports often focus on sub-units within the - Reports focus on the company in its entirety.
organization.
Accounting Information
“Managers do make decisions, and in making decisions, managers used information.”

“Management accountants should provide both quantitative and qualitative information to assist
the managers in decision making”.

“Managers are information users while accountants are information providers.”

 Managers need information to make decisions about:
Accounting - Acquiring and financing production capacity
System - Determining which products to produce and market
It is a formal mechanism for gathering, - Pricing products, jobs or services
organizing, and communicating
information about an organization’s
activities.
- Determining the best method of distributing goods and
services to the target market
- locating the best property for production facilities
- Financing the costs of production and operations
Important Role of Management
Accountant in Management Functions
- Planning
-Controlling
- Performance Evaluation is the process of determining the degree of success in accomplishing
the plan.
“Effectiveness is a measure of how well an organization’s goals and objectives are achieved while
Efficiency is a measure of the degree to which tasks were performed to produce the best yield at the lowest
cost from the resources available.”
- Decision Making
Organizational Structure
- Refers to how authority as well as responsibility for making decisions is distributed in the
organization.

The most common officers involve in the financial information are:

- Chief Executive Officer (CEO)
- Chief Financial Officer (CFO)
- Treasurer
- Controller
- The Chief Accountant
Example of an Organizational Structure
Good financial management will help
any business provide:
-better products or services to its customers
- pay higher wages and salaries to its workers and employees, and even managers
-higher returns to the investors who put up capital needed to form the company and then
operate the firm.
Financial Management Responsibilities
- Forecasting and planning
The financial manager must coordinate or interact with ither executives as they jointly look
ahead and formulate plans, which will shape the firm’s future position.

-Capital investment and financing decisions

On a long-term basis, the financial manager must raise the capital needed to support growth.

-Controlling and coordinating

The financial manager must interact with other executives so that the firm could operate as
efficiently as possible.
 Treasurer vs Controller
- Financial planning or fund management -planning, controlling, designing, installing and
maintaining the cost accounting system.
-Obtaining funds to finance the acquisition of fixed
assets -Predicting future costs.
-Evaluating the acquisition of fixed assets -Coordinating the development of the budget.
-Short-term finance sourcing or managing working -Accumulating and analyzing actual costs.
capital needed
-Preparing and analyzing performance reports.
-Banking and custody
-Preparing reports for external users.
-Managing the pension fund
-Providing information for special decisions.
-Managing foreign exchange transactions
-Consulting with management as to cost
-Credits and collection information.
-Distribution of corporate earnings to owners -Internal auditing, tax administration, protection
of assets and economic appraisal
Professional Ethics for Management
Accountants
What is a professional ethics?
“Professional ethics is concerned with the standards and moral conduct that govern the
profession and its members. More specifically, professional ethics examines issues, problems,
and the social responsibility of the profession itself and individual practitioners in the light of
philosophical and, in some contexts, religious principles among which are duty and obligation.”

White Collar Crime

“White-collar crime is a nonviolent crime committed for financial gain. According to the FBI, a
key agency that investigates these offenses, "these crimes are characterized by deceit,
concealment, or violation of trust." ”
Sarbanes Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 is a law the U.S. Congress passed on July 30 of
that year to help protect investors from fraudulent financial reporting by
corporation. Also known as the SOX Act of 2002 and the Corporate
Responsibility Act of 2002, it mandated strict reforms to existing securities
regulations and imposed tough new penalties on lawbreakers.
The act took its name from its two sponsors—Sen. Paul S. Sarbanes (D-Md.) and
Rep. Michael G. Oxley (R-Ohio).
Corporate Governance
-is a system of organizational control that is used to define and establish the lines of
responsibility and accountability among major participants in the corporation. These
participants include the shareholders, board of directors, officers and managers and other
stakeholders.

Ethical conduct is a necessary asset of a management accountant. The credibility of the

information provided, analyses done, and opinions offered depends heavily on the reputation of
the responsible accountant.
Ethical Conduct
Competence
- “Is defined as the capacity to respond to individual, or societal, demands in order to perform
an activity or complete a given task.”
* Maintain an appropriate level of professional competence by ongoing development of their
knowledge and skills.
* Perform their professional duties in accordance with laws, regulations and technical standards.
Confidentiality
* Refrain from disclosing confidential information acquired in the course of their work, except
when authorized, unless legally obligated to do so.
Ethical Conduct
Integrity
* Avoid actual or apparent conflicts of interest and advise all appropriate parties of any
potential conflict.
* Refrain from engaging in any activity that would prejudice their ability to carry out their duties
ethically.
Objectivity
* Communicate information fairly and objectively.
Definition of Terms
Administrative Management- is an approach that focuses on principles that can be used by
managers to coordinate the internal activities of organizations.
Functional authority- the authority of staff departments over others in the organization in
matters related directly to their respective function.
Functional managers- are managers who have responsibility for a specific specialized area of the
organization and supervise mainly individuals with expertise and training in that area.
Functional structure- is a structure in which positions are grouped according to their main
functional or specialized area.
Functional-level strategy – is a type of strategy the focuses on action plans for managing a
particular functional area within a business in a way that supports the business-level strategy.
Definition of Terms
Goal Commitment- is one’s attachment to, or determination to reach.
Operating Plans- contain the details necessary to implement and maintain an organization’s
strategies.
Strategic Goal- is broadly defined targets or future end results set by top management.
Strategic management – is a process through which managers formulate and implement
strategies geared toward optimizing strategic goal achievement, with given available
environmental and internal conditions.
Grand strategy- is a master strategy that provides the basic strategic direction at the corporate
level.
Definition of Terms
Strategy formulation – is the process of identifying the mission and strategic goals, conducting
competitive analysis, and developing specific strategies. It is the foundation level of
organizational planning.
Strategy implementation – is the process of carrying out strategic plans and maintaining control
over how those plans are carried out.
Total Quality Management (TQM) – is a management system that is an integral part of an
organization’s strategy and is aimed at continually improving product and service quality so as
to achieve high levels of customer satisfaction and build strong customer loyalty.
Other Reference:
- https://www.slideshare.net/PeleZain/chapter-1-introduction-to-managerial-accounting