Overview of Management Accounting
Overview of Management Accounting
Overview of Management Accounting
Because planning and control is for the short term, it is mainly used to keep
operations in line with objectives and to evaluate how well a manager has
performed.
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DECISION MAKING the purposeful selection from among a set of alternatives in the light of
a given objective.
PLANNING
DECISION MAKING
EXERCISE 1-1: Each of the following scenarios requires the use of accounting information to carry
out one or more of the following managerial activities: PLANNING, CONTROL (including
performance evaluation), or DECISION MAKING. Identify the managerial activity or activities that
are applicable for each scenario by putting an X mark on the appropriate column.
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DISTINCTIONS BETWEEN MANAGEMENT ACCOUNTING AND FINANCIAL ACCOUNTING
The major function of cost accounting is cost accumulation for inventory valuation and
income determination. Management accounting, however, emphasizes the use of these cost data
for planning, control and decision making purposes. Management accounting typically does not deal
with the details of how costs are accumulated and how units are computed for inventory valuation
and income determination. Although unit cost data are used for pricing and other managerial
decisions the method of computation itself is not a major topic of management accounting but
rather of cost accounting.
EXERCISE 1-2: Financial Accounting information and managerial accounting information have a
number of distinguishing characteristics. For each of the characteristics listed below. Indicate which
characteristics are more closely related to financial accounting by placing the letter F in the
space to the left of the item and indicate those characteristics which are more closely associated
with managerial accounting by placing the letter M to the left of the item.
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ORGANIZATIONAL ASPECT OF MANAGEMENT ACCOUNTING
There are two types of authorities in the organizational structure of an entity, they are:
1) LINE authority the authority to give orders to subordinates. Line management are
responsible for attaining the goals set by the organization as efficiently as possible. Production
and sales managers typically possess line authority
2) STAFF authority the authority to give advice, support and service to line departments. Staff
managers do not command others. Examples of staff authority are found in personnel,
purchasing, engineering and finance.
EXERCISE 1-3: the job responsibility of two employees of Celine Manufacturing follow:
LINE STAFF
Ethan Del Sol, Cost Accounting Manager: Ethan is responsible for
measuring and collecting costs associated with the manufacture of the
garden hose product line. He is also responsible for preparing periodic
reports, comparing the actual costs with planned costs. These reports
are provided to the production line managers and the plant manager.
Ethan helps explain and interpret the reports.
REQUIRED: Identify Ethan and Liam as line or staff authority by putting an X mark on the
appropriate column.
CONTROLLERSHIP
TREASURERSHIP
Controllership and treasurership constitute corporate finance. Controllership deals with
records, systems and processes to attain the objectives of internal controls and good managing.
Treasurership deals with money, cash or wealth of an organization. A treasurer knows the sources
of money and exercise prudence in using the money of an organization.
FUNCTIONS OF TREASURERSHIP
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1) provision for capital 5) credit and collection
2) investor relations 6) investments
3) short-term borrowings 7) insurance
4) banking and custodianship
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