MANAGEMENT

ACCOUNTING [ACC107]
Lecture 1
Chapters 1

Assessment Method
Components

Weightings

Mid-term exam

20%

Major Assignment

20%

Final Examination

60%

Due Dates

Week 8
Exam Week

Assignments (20%)

Assignments are due at 9.00 pm on the date

specified and must be professionally
presented (i.e., word processed, stapled,
spell-checked, etc) and submitted in hardcopy form.
Penalty for late submission of items for
assessments is 5% of the maximum mark for
each day late.
A note on Plagiarism
Copying can result in ZERO for the whole
assignment or part of the assignment

Mid term exam

Held during Week 8
Time allowed: 1 hour and 30 mins (no
reading time)
Questions are based on first half of the
term.
Questions will be both MCQ and
Question based
Mid-term test is worth 20% for the final
grade

Final Exam
Weighs 60% of the course (Marked out of
100 marks)
3 hour closed booked exam
Two parts in the exam (Part A and Part B)
Attendance of 80% is compulsory to sit
the exam

Aim of this course

The aim of this paper is to develop
knowledge and understanding of how to
prepare and process basic cost and
quantitative information to support
management in planning and decisionmaking in a variety of business contexts.

Syllabus Contents
The syllabus contents include the following:
Explain the nature, source and purpose of
management information
Explain and apply cost accounting techniques
Prepare budgets for planning and control
Compare actual costs with standard costs and
analyse any variances
Explain and apply performance measurements
and monitor business performance.

Chapter 1
The topics covered are:
Information
Planning, control and decision making
Financial
accounting
and
cost
and
management accounting
Cost accounting information and decision
making

Information
Information is data that has been processed
in such a way as to be meaningful to the
person who receives it. Information is
anything that is communicated

Qualities of good information

Relevance: Information must be relevant to the purpose for
which a manager wants to use it. In practice, far too many
reports fail to 'keep to the point' and contain irrelevant
paragraphs which only annoy the managers reading them
Completeness: An information user should have all the
information he needs to do his job properly. If he does not
have a complete picture of the situation, he might well make
bad.
Accuracy: Information should obviously be accurate
because using incorrect information could have serious and
damaging consequences. However, information should only
be accurate enough for its purpose and there is no need to go
into unnecessary detail for pointless accuracy.
Clarity: Information must be clear to the user. If the user
does not understand it properly he cannot use it properly.
Lack of clarity is one of the causes of a breakdown in
communication. It is therefore important to choose the most
appropriate presentation medium or channel of
Communication.

Qualities of good information

Confidence: Information must be trusted by the managers
who are expected to use it. However not all information is
certain. Strategic information, especially relating to the
environment, is uncertain.
Timing: Information which is not available until after a
decision is made will be useful only for comparisons and
longer-term control, and may serve no purpose even then.
Information prepared too frequently can be a serious
disadvantage.
Channel of communication: There are occasions when
using one particular method of communication will be better
than others.
Cost: Information should have some value, otherwise it
would not be worth the cost of collecting and filing it. The
benefits obtainable from the information must also exceed the
costs of acquiring it.

Why is information important?

Management need information

cost of a new product
cost of repairing, buying and hiring the
machine
current sales settlement patterns and
expected changes to the pattern if
discounts wee offered.

What type of information is needed

For an organisation
Financial information
- Non-financial information
- A combination of both
-

Planning, control and decisionmaking

Information for management is likely to
be used for planning, control and decision
making.
Planning forces management to think
ahead systematically in both the shortterm and the long term.

Planning, control and decisionmaking

What is the objective of a business?

Planning, control and decisionmaking

Long- term strategic planning
known as corporate planning, involves
selecting appropriate strategies so as to
prepare a long term plan to attain the
objective
Short term tactical planning
Used to achieve the long term plans and
this can be quarterly or monthly based
plans.

Planning, control and decisionmaking

Control: Two stages in the control process
- Performance of the organisation
- The corporate plan
Effective control is therefore not practical without
planning, and planning without control is
pointless.

Planning, control and decisionmaking

Decision making:
Decision making always involves a choice
between alternatives and is the role of the
management accountant to provide information
so that management can reach an informed
decision.

Anthony's view of management

activity
Anthony divides management activities
into:
- Strategic planning: the process of deciding on
objectives of the organisation
- Tactical (or management) control: the process by
which managers assure that resources are obtained and
used effectively and efficiently to achieve the
objectives
- Operational control: the process of assuring the
specific tasks are carried out effectively and
efficiently

Strategic Planning
Strategic plans are those which are set or
change the objectives, or strategic targets
of an organisation.

Tactical/Management control
Management control is concerned with
decisions about the efficient and effective
use of an organisations resources to these
objectives.
These are the most important areas of Management control
- Resources (4Ms) men, materials, machines and money
- Efficiency
- Effectiveness

Operational control
Operational control is the task of ensuring that
specific task are carried out effectively and
efficiently.

Management Control Systems

A system which measures and corrects the
performance of activities of subordinates in
order to make sure that the objectives of an
organisation are being met and the plans
devised to attain them are being carried out

Basic elements of management

control systems are:
-

Planning
Recording
Carrying out
Comparing
Evaluating
Corrective actions

Types of information
Strategic information: information used by
senior managers
Tactical information: is used by middle
management. Eg; how to use the resources
Operational information: is used by front line
managers

Financial accounting vs
management accounting
Financial Accounts
Details of performance over a period of time
Legal requirement
Format dictated by IAS & IFRS
Concentrates on business as a whole

Monetary nature
Historic by nature

Financial accounting vs
management accounting
Management Accounts
Are used to control and manage the organisation
Also for decision making
No legal requirement
No set format
Can be used to analyse only one section of the
company
Can have qualitative information
Can be used for future planning

Cost accounts
Cost accounting is gathering of cost information
and its attachment to cost objects, the
establishment of budgets, standard costs and
actual cost of operations, processes, activities or
products; and the analysis of variance,
profitability or the social use of funds
Cost accounting is concerned with the
following:
- Preparing statements (eg: budgets, castings)
- Cost data collection
- Applying costs to inventory, products and
services

Cost accounts
Aims of cost accounts
- Cost of goods produced
- Cost of departments
- Calculating revenues
- Profitability of a product
- Selling prices
- Vale of inventories of goods (RM, WIP)
- Future cost
- How actual costs compare with budgeted costs
- What information management needs

Any questions??