ReSA THE Review SCHOOL OF ACCOUNTANCY @ MANAGEMENT SERVICES (A. LEE) MS-A: MANAGEMENT ACCOUNTING MANAGEMENT ~ the process of planning, organizing, and controlling a certain task to realize the objectives of the organization BASIC FUNCTIONS OF MANAGEMENT Planning involves: setting up immediate and long-term goals. + deciding which alternative means would be best sulted to attain the set goals. LANNING i Organizing involves: ~ deciding hovs to utilize available resources as plans are being carried out. + tackling activities such as staffing, subordirating, directing, motivating, etc. ORGANIZING Controlting involves: = comparing actual performance with set plans or standards. ~ deciding what corrective actions to take should there be any deviation (variance) between actual and planned performance. CONTROLLING Jade NOTE: decision-making is an inherent function of management; all management functions would require a certain amount of decision-making. MANAGEMENT BY OBJECTIVES vs. MANAGEMENT BY EXCEPTION Management by Objectives is a procedure in which a subordinate and a supervisor agree on goals and the methods of achieving them and develop a pian in accordance with that agreement, The subordinate Is then evaluated with reference to the agreed plsn at the end of the period. Management by Exception Is a technique of highlighting those which vary significantly from plans and standards in fine with the management principle that executive time should be spent on items that are non-routine and are identified as top priority. MANAGEMENT ACCOUNTING - an application of appropriate techniques and concepts in processing historical and projected economic data of an entity to assist management in establishing plan to . meet economic objectives and in making rational decisions with a view toward achieving the objectives. (American Association of Accountants) MANAGEMENT ACCOUNTING vs, FINANCIAL ACCOUNTING TRrGutel, Melee, FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING 1. User of information —Primarity for external users Exclusively for internal users (management) 2, Guiding principles Generally Accepted Accounting Principle Management wants and needs 3. Optional/Mandatory — Mandatory (especially for public entities) Discretionary or optional 4, Type of information Primarily monetary (financial) in nature Monetary and non-monetary 5, Emphasis of reports Reliability (precision of data) Relevance (timeliness of data) 6. Purpose/End result Financial reporting and compliance Decision-making 7. Source of data From company's (internal) info system From internal and external sources 8. Amount of detail Compressed and simplified Extensive and detailed 9. Focus of information Focus mainly on business as a whole ‘Focus on segments and business as a whole 10. Frequency Periodic (annually, quarterly) [As frequent as need arises 11, Time orientation 12. Unifying model PUAKS: Chat BA Oe Mainly historical (past) date Assets = Liabilities + Equity Page 4 of 4 pages Future-oriented using current and past data No unifying model or equationReSA - The Review School of Accountancy MS-A~ NS? MANAGEMENT ACCOUNTING THE CONTROLLER: CHIEF MANAGEMENT ACCOUNTANT CONTROLLERSHIP - the practice of the established science of control, which Is the process by which management assures itself that company resources are obtained and utilized according to plans that are in line with the company’s set objectives. CONTROLLER ~ an officer of an organizetion who has responsibility for the accounting aspect of management control, It is a title given to a person hexding the position of a chief management accounting ‘executive of a business. enterprise. In many accounting texts and business iiterature, the controller is often referred to as the ‘chief accountant.’ CONTROLLER FINANCIAL ACCOUNTING COST & MANAGEMENT ‘ACCOUNTING ACCOUNTING SYSTEMS & PROCEDURES FINANCIAL ANALYSIS & SPECIAL STUDIES GOVERNMENT & TAX REPORTING LINE FUNCTION vs. STAFF FUNCTION Line function — the authority to give command or orders to subordinates. It exercises direct downward authority aver line departments (e.g., VP for operations over operations manager). Staff function - the authority to advise but not to command others; the function or responsibility of providing line and staff managers with specialized service and technical advice for Support. It is exercised laterally or upward. The controiler primarily exercises a staff function as the controller's office gives advice and service to other departments and to entire organization as a whole; however, in the accounting department that is usually headed by the controller, the controller has a line authority over subordinates. CONTROLLER vs. TREASURER To avoid incompatible duties being assigned to a single officer, a controller, who is primarily concerned with accounting, must not hold at the same time the position of @ treasurer, who Is primarily concerned with custody of funds. Consider the following: CONTROLLER (001501) TREASURER + 004i 1. Planning and control 1. Provision of capital wot 2. Reporting and interpreting 2. Investor relations 5 Yoo °3, Evaluating and consulting 3. Short-term financing cus ee {uo 4. Tax administration 4, Banking and custody phe ka arrows 5. Government reporting 5, Credit and collections (cio sousrs Gaul tic © Protection of assets 6. Investments ae aie 7. Economic appraisal 7. Insurance : STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS According to the Standards of Ethical Conduct set by the Institute of Management Accountants (IMA), management accountants have a responsibility to, ‘maintain an appropriate level of professional competence by ongomna | [eceeee of their knowiedge and skills _ | refrain from disclosing confidential information acquired in the course of their Work, except when authorized and/or unless legally obligated to do so_ 3 |x fran fom ehgening in any acivty that would prejudice their ability to | | carry out their duties ethically communicate information fairly: and objectively and disciose fully ail relevant informati lati 5‘ need. | eee | i Ia [ Page 2 of 4 pages E>ReSA - The Review Schoo! of Accountancy MS-A MS: MANAGEMENT ACCOUNTING MULTIPLE-CHOICE QUESTIONS (Sources: CMA/CIA/RPCPA/AICPA/Various test banks) a 1. The discipline of accounting concerned with providing information to management in making decisions about business operations. a. Cost accounting b. Financial accounting ¢. Government accounting d, Management accounting 2. The primary purpose of managemient accounting is to provide information ‘a, Toexternal users b. To internal users c. To both internal and external users d. To management and government = é 3. Which of these information characteristics is deemed most important to management accounting? a, Verffiability and accuracy b. Comparability and full disclosure ¢. Relevance, flexibility and timeliness d. Conservatism and substarice over form 4. Managerial accounting 2. Is governed by Generally Accepted Accounting Principles (GAAP). b. Is concerned only with monetary information. +. ISdiscretionary rather than mandatory. d. Is focused on business as a whole rather than on segments of the business. t 5. Managerial accounting is similar to financial accounting in that E a. Both are governed by Generally Accepted Accounting Principles , Both classify reported information in the same way. ¢, Both concentrate with historical costs. 4. Goth dea! with economic events. 6. Which of the following statements is false? ‘a. Management accounting Is synonymous to managerial accounting. b. Management accounting has no externally imposed standards while financial accounting has to follow the Generally Accepted Accounting Principles. . Financial accounting deals with information that is primarily reported to 1 outside the organization. d, Cost accounting reports refer to accounting for the annual cost of operating a business. dividuals C 7. Which of the following statements is true? @. Financial accounting is @ subset of cost accounting. b. Management accounting is a subset of cost accounting. ©. Cost accounting is @ subset of both management and financial accounting. d, Management accounting is a subset of both cost and financial accounting. &Y 8. Cost accounting system is usually utilized for ‘a. Internal and external reporting that may be used in making nonroutine decisions and in developing plans and policies b. External reporting to government, various outside parties, and shareholders ¢. Internal reporting for use in management planning and control, and external reporting to the extent its product-costing function satisfies external reporting requirements 4. Internal reporting for use in planning and controlling routine operations a 9. The basic management process does not include a. Rationalizing b. Controlling lets, ©. Subordinating eS d. Planning ‘ 10. The function of management that compares planned results against actual results is known as s a. Planning b. Directing and motivating c. Controtling d. Decision making Page 3 of 4 pages ®