Role of Managerial Accounting and Its Direction Toward A Specific Field

ROLE OF MANAGERIAL ACCOUNTING AND ITS DIRECTION TOWARD A
SPECIFIC FIELD
Introduction
This module deals with the role of managerial accounting in the management
process as well as the direction of accounting toward a specific field. Furthermore, this
will tackle about the functions of management accounting on planning, directing,
motivating and controlling; the comparison of financial and managerial accounting and
the need of business and non-business organizations for management accounting.
Learning Objectives:
At the end of this module, the student should be able to:
1. Describe the role of managerial accounting in the management

process;
2. Explain the direction of managerial accounting toward a specific
field;
3. Discuss the management functions and appreciate the need for
management of accounting on planning, directing and motivating,
and controlling;
4. Differentiate management accounting and financial accounting;
5. Understand the need of management accounting to business and
non-business organization.
THE ROLE OF MANAGEMENT ACCOUNTING
Provide information for costing out of services, products, and other objects of
interest to management. Provide information for planning, controlling, and continuous
improvement. Helps managers make operational decisions – intended to help increase
the company’s operational efficiency. Also helps in making long term investment.
MANAGEMENT FUCTIONS AND THE NEED FOR MANAGEMENT ACCOUNTING

INFORMATION
1. PLANNING – involves the following:

a. Setting of immediate, as well as long range goals for the organization
b. Predicting future conditions that are expected to prevail
c. Considering the different means or strategies by which the goals set maybe
achieved
d. Deciding which of the strategies should be used to attain such goals
2. DIRECTING AND MOTIVATING – involves overseeing the day to day activities,
seeing to it that the organization is functioning smoothly and the members of the
organization are mobilized to carry out plans.
3. CONTROLLING – involves checking the performance of activities against the plan of

standards set and deciding what corrective actions to take should there be any
deviation between the actual planned/standard performance.
Note: All the aforementioned management functions involve decision making. In

performing the decision-making functions, managers need information. Such
information is provided by management accountants.
You can watch the video on Introduction to Managerial [email protected]
ACTIVITIES INVOLVED IN MANAGEMENT ACCOUNTING
1. Determining, accumulating and explaining cost – both manufacturing and non-

manufacturing costs.
2. Computing or determining product cost/service cost.
3. Determining cost behavior.
4. Assisting the management in profit planning/budgeting.
5. Accumulating and presenting data which may be used by managers in decision
making.
6. Providing basis for cost control with the use of standard cost and other planned
objectives.
7. Assisting managers in developing the company’s prices for external transactions.
APPLICATION OF MANAGEMENT ACCOUNTING
1. BUSINESS – Managerial accounting provides the economic information needed

by the businessmanagers so they can attain their profit/economic goals.
2. NON-PROFIT ORGANIZATIONS –These organizations likewise need the
economic information provided by management accountants in attaining their
organizations’ objectives.
PRINCIPLES GOVERNING THE DESIGN OF MANAGEMENT ACCOUNTING

SYSTEM
1. The system should help to establish the decision-making authority over the
organizations’ assets.
2. The information generated by the system should support planning and decision
making.
3. The reports should provide a means for performance monitoring and evaluation.
DISTINCTIONS BETWEEN MANAGEMENT ACCOUNTING AND FINANCIAL

ACCOUNTING
The accounting system is part of the organization’s management information

system (MIS).
COST ACCOUNTING SYSTEM – Accumulates data about the cost of producing

goods and services which is part of the organization’s overall accounting system. It
accumulates cost information for both management accounting and financial
accounting.
MANAGEMENT ACCOUNTING VS. FINANCIAL ACCOUNTING
MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING

Users of Internal users: officers and External users: stockholders,
Report managers creditors, and concerned
government agencies
Purpose To provide internal users with To provide external users with

information that may be used by information about the
managers in carrying out the organization’s financial position
functions of planning, controlling, and results of operations.
decision making and performance
evaluation.
Types of Different types of reports, such as Primarily, financial statements
Report budgets, financial projections, cost and the accompanying notes to
analyses, etc., depending on the such statements.
specific needs of management.
Basis of Reports are based on combination Reports are based almost
Report of historical, estimated and exclusively on historical data.
projected data.
Standards of In preparing reports the Reports are prepared in
Presentation management of the company can accordance with generally
set rules to produce information accepted accounting principles
most relevant to its specific needs. and other pronouncements of
authoritative accounting bodies.
Reporting Focus of reports is in the company’s Financial reports relate to the
Entity value chain, such as a business business as a whole.
segment, product line, supplier or
customer.
Period Reports may cover any time period Reports usually cover a year, a
Covered – year, quarter, month, week, day, quarter or a month.
etc. and may be required as
frequently as needed.

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ROLE OF MANAGERIAL ACCOUNTING AND ITS DIRECTION TOWARD A

At the end of this module, the student should be able to:

1. Describe the role of managerial accounting in the management

THE ROLE OF MANAGEMENT ACCOUNTING

MANAGEMENT FUCTIONS AND THE NEED FOR MANAGEMENT ACCOUNTING

1. PLANNING – involves the following:

3. CONTROLLING – involves checking the performance of activities against the plan of

Note: All the aforementioned management functions involve decision making. In

You can watch the video on Introduction to Managerial [email protected]

ACTIVITIES INVOLVED IN MANAGEMENT ACCOUNTING

1. Determining, accumulating and explaining cost – both manufacturing and non-

APPLICATION OF MANAGEMENT ACCOUNTING

1. BUSINESS – Managerial accounting provides the economic information needed

PRINCIPLES GOVERNING THE DESIGN OF MANAGEMENT ACCOUNTING

DISTINCTIONS BETWEEN MANAGEMENT ACCOUNTING AND FINANCIAL

The accounting system is part of the organization’s management information

COST ACCOUNTING SYSTEM – Accumulates data about the cost of producing

MANAGEMENT ACCOUNTING VS. FINANCIAL ACCOUNTING

MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING

Purpose To provide internal users with To provide external users with

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