MANAGEMENT

ACCOUNTING
ITS NATURE AND SCOPE
Definition

 the process of identification, measurement,

accumulation, analysis, preparation, interpretation
and communication of financial information, which
is used by the management to plan, evaluate and
control activities within an organization.

Management Accounting | Its nature and Scope

Nature

1. No fixed norms followed

2. Increased in efficiency.
3. Supplies Information not decisions.
4. Concerned with forecasting
a. Sales forecasting
b. Production forecasting
c. Earning forecasting
d. Cost forecasting
Management Accounting | Its nature and Scope
Objective

 Management Accountants are concerned with

providing information to managers who direct and
control the organization

 Management Accountants participates in assuring

that the organization operates as a unified whole in
its long-run and short-run best interests

Management Accounting | Its nature and Scope

Scope

 Generally, Management Accountants do the

following tasks:

 Scorekeeping or data accumulation

 Interpreting and reporting of information

 Problem Solving

Management Accounting | Its nature and Scope

Scope

 Specifically, Management Accountants do the

following tasks:

 Planning

 Controlling

 Decision Making

Management Accounting | Its nature and Scope

Planning

 Key activity for all companies

 Involves identifying alternatives and selecting

a course of action and how to implement

Management Accounting | Its nature and Scope

Scope

 Specifically, Management Accountants do the

following tasks:

 Planning

 Controlling

 Decision Making

Management Accounting | Its nature and Scope

Control

 It is achieved by evaluating the performance of

managers and the operations they are responsible

 Use of Accounting control reports (performance

report)

 Company plans has an important role in the control

process

Management Accounting | Its nature and Scope

Planning and Control Process
Plan

Action Taken to
Decisions to change
implement plan
operations or revise plans

Results
Decisions to reward or
punish managers Comparison of planned
and actual results

Evaluation

Management Accounting | Its nature and Scope

Scope

 Specifically, Management Accountants do the

following tasks:

 Planning

 Controlling

 Decision Making

Management Accounting | Its nature and Scope

Decision Making

 Decisions are made to reward or punish managers

 Decisions are made to change operations or revise

plans

 Decisions will determine future profitability and the

survival of the company

Management Accounting | Its nature and Scope

In summary

 Management Accountant develops cost

management information for the Chief Financial
Officer, other managers and employee teams to use
to manage the firm and make it more competitive
and successful.

Management Accounting | Its nature and Scope

 Financial Accounting
vs Management Accounting

 Financial Accounting (FA)

- involves systematic recording of business
transactions, governed by a body of international
financial reporting standards (IFRS) leading to the
preparation of financial statements for the use of
various interested parties, internal and eternal

Management Accounting | Its nature and Scope

 Financial Accounting
vs Management Accounting

 Management Accounting (MA)

- Concerned with providing financial information to
persons within the organization to enable them to
make informed judgements and effective decisions
which further the organization’s goals

Management Accounting | Its nature and Scope

As to objective

FA : provide data both internal (management) and

external (e.g. creditors, owners, government, etc.)

MA : provide data for internal users within the

business organization

Management Accounting | Its nature and Scope

As to compliance with International
Reporting Standards (IFRS)

FA : Financial data should be recorded and presented

in accordance with IFRS

MA : Reports need not be presented in conformity

with IFRS to be able to present more useful data to
management

Management Accounting | Its nature and Scope

As to emphasis on the future

FA : primarily provides summaries of past financial

transaction

MA : has a strong future orientation

Management Accounting | Its nature and Scope

As to the relevance and flexibility
of data

FA : All-purpose reports with historical data are

prepared for use of different parties

MA : Special reports containing both historical and

projected data are prepared to meet the needs of
specific users.

Management Accounting | Its nature and Scope

As to emphasis on precision and
timeliness of report

FA : Reports are still useful even if submitted late and

show summaries of financial consequences of actual
and past activities where precision is required

MA : Timeliness is often more important than precision

to managers. Prompt submission of the report is
necessary

Management Accounting | Its nature and Scope

As to reporting requirements
of an organization

FA : Primarily concerned with reporting for the

company as a whole

MA : focuses reporting on the parts or segments (i.e.,

product lines, sales, territories, departments) of a
company

Management Accounting | Its nature and Scope

As to requirement for compliance
with law

FA : required by law as exemplified by the report

requirements of the BIR, SEC and other government
entities

MA : this is not mandatory

Management Accounting | Its nature and Scope

Similarities

FA and MA : record, organize, summarise, report

Management Accounting | Its nature and Scope

End of the report. Thank you!
Cristoni A. Macaraeg
Al John P. Marcelino