Management Accounting

Environment

Basic Concepts

The head of a management accounting group

in an organization is called management
accountant. Sometimes, he is called as the
Vice President for Finance, Chief Financial
Officer, Accounting Manager, or Budget
Director. Traditionally, a management
accountant is called as the controller (or
comptroller).

Basic Concepts

Management accounting is the application of

appropriate techniques and concepts in
processing the historical and projected
economic data of an entity to assist
management in establishing a plan for
reasonable economic objectives and in the
making of a rational decisions with a view
towards achieving these objectives. (AAA
Committee on Management Accounting)

Controllership
Planning
Decision Making

Controlling
Planning and controlling
Reporting
Evaluation
Government Relations and
Reporting

Organizing and
Directing
Protection of assets
Economic appraisal
Tax Administration

The Planning and Controlling Cycle

Goals
Objective
s
Plans

Budgets

Actions

Revisions

Results

Feedback

Standards

The Planning and Controlling Cycle

Hence, the topics in management accounting

includes the following:

Responsibility accounting
Marginal costing
Standard costing
Budgeting
Variance analysis
Short-term non-routine decisions

Internal Controls
Internal Controls
Components

Purposes

Structure (plan of organization)

Protection of assets
Accuracy and reliability of
accounting data

Policies (methods and measures)

Operational efficiency
Adherence to policies

Internal Controls
There are 11 cardinal principles of internal
controls that may be classified as follows:

Organizational Controls

Responsibilities must be fixed

Functional responsibilities should be segregated
No one person should be in complete control of a business
transaction
All available proof of accuracy should be utilized

Personnel Controls

Employees should be carefully selected and trained

Employees should be rotated
Employees should be bonded, especially those in a
position of trust.

Internal Controls
There are 11 cardinal principles of internal
controls that may be classified as follows:

Supervision Controls

Operating instructions should be in writing

Controlling accounts should be used
The advantages of double-entry accounting should not be
overemphasized
Use of mechanical and/or electronic equipment, if
feasible.

Organizational Design and Transaction

Cycle

Organizational structure should be designed

according to resource or functional
responsibilities. This is done in relation to
transaction cycle. The basic functional
responsibilities in a transaction are (CARE-P):

Authorization
Execution
Recording
Custodianship
Periodic accountability

In designing organizational structure, the 5 basic

transactional responsibilities must be segregated.

Treasurership
Functions of Treasurership (PISBCII)

Area of Concern

Provision of Capital

Financing

Investor Relations

Financing

Short-term borrowings

Financing

Banking and custodianship

Financing

Credit and collection

Operating

Investments

Investing

Insurance

Risk Management

Financial Accounting and Management

Accounting
Financial Accounting

Management Accounting

Historical in Nature

Deals with the future

Uses GAAP

Does not use GAAP

Reports are wholistic

Reports are segmentized

Reports are for general-purpose

Reports are for management

use only

With unifying equation A = L +

C

No unifying equation

Focuses on accounting and

finance

Multidisciplinary, also deals with

other areas of knowledge and
disciplines

Focuses on the process of

preparing the financial
statements

Focuses in the usefulness of

financial statements

Precision

Timeliness