Mgt. accounting, purpose definition and scope
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Management accounting focuses on providing information to managers to aid in planning, controlling, evaluating performance, and decision making. It assists with routine operations, long-term planning, inventory valuation, and income determination. The planning and control process involves setting standards, measuring actual performance, and comparing the two. Management decision making identifies problems, objectives, alternative solutions, consequences of each, and selects an alternative. Management accounting differs from financial accounting in its internal focus, special purpose reports, consideration of future plans, and allowance for subjective data. Areas not governed by accounting principles include identifying relevant decisions and organizing the most useful information.
Mgt. accounting, purpose definition and scope
- 2. Management Accounting • Focuses on providing information to managers to help them in fulfilling their functions of planning, controlling, performance evaluation and decision making.
- 3. Purpose of Management Accounting 1. Planning and controlling routing operations 2. Non-routine decisions, policy making, and long-range planning. 3. Inventory valuation and income determination
- 4. Planning and Control Process Includes 1. Decide on a standard budget specifying what actual performance should be 2. Measure the results of actual performance 3. Compare actual performance with the standard or budget.
- 5. Management Decision Making Includes 1. Identifying the problem requiring managerial action. 2. Specify the objective or goal to be achieve 3. List the possible alternative courses of action 4. Gather information about the consequences of each alternative 5. Make a decision by selecting one of the alternatives.
- 6. Distinction Between Management Accounting and Financial Accounting Management Accounting Financial Accounting Info to internal users Info to external users Special purpose reports General purpose reports Past or outline future plans Reports on past activities No subject to standards must conform to standards Allows a subjective data objective data
- 7. Areas not controlled in Management Accounting by Generally Accepted Accounting Principles 1. Identifying the decisions to be made 2. Identifying the information that is relevant to the decision making process, and 3. Organizing the information that is most useful to the management.
- 8. Cost and Managerial Accounting The primary objective of Cost and Managerial Accounting is to assist in planning and control functions of internal decision makers. In contrast, Financial Accounting is primarily concerned with the information needs external decision makers.
- 9. Managerial Accountants Managerial accountants in business includes personnel in the controller’s office, as well as budget analysts, cost analysts and financial analysts.
- 10. The specific duties of managerial accountants include : 1. Assisting in the design of the organization’s information system. 2. Ensuring that the system performs adequately. 3. Periodically reporting information to interested managers, and 4. Undertaking special analyses.
- 11. Definition of Terms Management (Managerial) Accounting – It is concerned with providing information to management that will be useful in making decisions about the operations of the business. Management by Exception – It means that the executives attention and effort are concentrated on the significant deviations from expected results and that the information system highlights areas most in need of investigation.
- 12. Management by Objective – A management approach designed to focus on the definition and attainment of overall and individual objectives with the participation of all levels of management. Planning – involves the establishment of goals and selection of courses of actions (decision models) to achieve those goals.
- 13. Planning and Control Cycle – the flow of management activities through the steps of planning, organizing and directing, controlling and then back to planning again. Controlling – is the officer who has the overall responsibility for all the accounting activities within the organizaiton.
- 14. Controllership – Is the practice of the established science of control, which is the process by which management assures itself that the resources utilized according to plans, in order to achieve the company’s objectives.