Scribd
Upload
4 views

Module 1A Notes (4)

The document provides an introduction to management accounting as part of the Bachelor of Accountancy program at the University of Limpopo. It distinguishes between financial accounting, which serves external stakeholders, and management accounting, which supports internal decision-making. Key learning outcomes include defining management accounting, understanding its elements, and differentiating it from financial accounting.

Uploaded by

sacey20.hb
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
4 views

Module 1A Notes (4)

The document provides an introduction to management accounting as part of the Bachelor of Accountancy program at the University of Limpopo. It distinguishes between financial accounting, which serves external stakeholders, and management accounting, which supports internal decision-making. Key learning outcomes include defining management accounting, understanding its elements, and differentiating it from financial accounting.

Uploaded by

sacey20.hb
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 6

University of Limpopo

School of Accountancy
Department of Financial Management

BACHELOR OF ACCOUNTANCY
(B ACC)
MANAGEMENT ACCOUNTING AND FINANCE
(MACN 350)
MODULE NOTES: 1A
Introduction to management accounting
© 2015 University of Limpopo, Private Bag X1106, Sovenga, 0727, South Africa
Printed and published by the University of Limpopo
All rights reserved. Apart from any reasonable quotations for the purpose of research, criticism or review as permitted under the
Copyright Act, no part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical,
including photocopy and recording, without permission in writing from the publisher.
MODULE 1A: INTRODUCTION TO MANAGEMENT ACCOUNTING

BACKGROUND

Financial Managers make important decisions within the organisation on a daily basis, with
an intention to increase stakeholder wealth. In order to make these decisions, information or
financial data prepared by, mostly, financial accountants is utilised.

The financial manager will apply the principles of management accounting in identifying,
measuring, analysing, interpreting, and communicating financial information to
management/executives for the pursuit of an organization's goals. It varies from financial
accounting because the intended purpose of managerial accounting is to assist users
internal to the company in making well-informed business decisions

ASSUMED PRIOR KNOWLEDGE

Students in Managerial Accounting and Finance 350 are expected to have mastered the
concepts covered in this module in prior courses during their undergraduate studies and
therefore should use this module to reinforce the knowledge previously gained.

EXAMINATION PERSPECTIVE

This module is normally integrated with other modules. The student might be required to
differentiate between financial accounting and management accounting, or identify roles of a
management accountant and of a financial accountant.

LEARNING OUTCOMES

By the end of this module you should be able to:

1. Define management accounting

2. Discuss the key elements of the definition of management accounting

3. Distinguish between financial accounting and management accounting

4. Explain the different levels in an organisation at which management accounting


information is required

5. Explain how reporting for financial accounting purposes differs from reporting for
management accounting purposes

2
LECTURE NOTES

A. Managerial vs. Financial Accounting.

Financial accounting is concerned with reports to external stakeholders. Managerial


accounting is concerned with reports prepared for the internal use of management. Since
these are internal reports, there is no requirement that management accounting reports
conform to IFRS.

Managerial accountants use information relating to the cost and sales revenue of goods and
services generated by the company. Cost accounting is a large subset of managerial
accounting that specifically focuses on capturing a company's total costs of production by
assessing the variable costs of each step of production, as well as fixed costs. It allows
businesses to identify and reduce unnecessary spending and maximize profits.

Because managerial accounting is not for external users, it can be modified to meet the
needs of its intended users. This may vary considerably by company or even by department
within a company. For example, managers in the production department may want to see
their financial information displayed as a percentage of units produced in the period. The HR
department manager may be interested in seeing a graph of salaries by employee over a
period of time. Managerial accounting is able to meet the needs of both departments by
offering information in whatever format is most beneficial to that specific need.

B. Need for Information.

Accurate and timely accounting information helps management plan effectively and to focus
attention on deviations from plans. In the planning stage, managers make decisions
concerning which alternatives should be selected. Financial information is often a vital
component of this decision-making. Once the alternatives have been selected, detailed
planning is possible. These detailed plans are usually stated in the form of budgets. The
control function of management is aided by performance reports that compare actual
performance to the budget. This feedback mechanism directs attention to activities where
managerial attention is needed.

C. Comparison of Financial and Managerial Accounting.

Financial and managerial accounting both rely on the same basic accounting database,
although managerial accountants often accumulate and use additional data. However,
important differences exist between the two disciplines:

1. Financial Accounting.
o Is concerned with reports made to those outside the organization.
o Summarizes the financial consequences of past activities.
o Emphasizes precision and verifiability.
o Summarizes data for the entire organization.
o Must follow IFRS since the reports are made to outsiders and are audited.
o Is required for publicly-held companies and by lenders.

3
2. Managerial Accounting.

o Is concerned with information for the internal use of management.


o Emphasizes the future.
o Emphasizes relevance and flexibility of data.
o Places more emphasis on non-monetary data and timeliness and less emphasis on
precision.
o Emphasizes the segments of an organization rather than the organization as a whole.
o Is not governed by IFRS.
o Is not required by external regulatory bodies or by lenders.

Management accounting may be further broken down into two categories as depicted
below:

Management
Accounting

Cost Financial
accounting Management

• “Cost accounting is concerned with recording, classifying, and summarising


costs for determination of costs of products or services, planning, controlling
and reducing such costs and furnishing information to management for decision
making”

Refer to the table below, to understand how each module covered in the first
semester, links to the definition above

Note: Cost accounting is covered in the first semester and financial management in
the second semester.

4
• “Financial Management mainly deals with three decisions, investment decision,
financing decision and dividend decision”

5
MODULE LINK TO COST ACCOUNTING DEFINITION

MODULE PURPOSE
TASK PLAN: PART 1 – FIRST SEMESTER

MODULE 1A: Introduction to management accounting Module background and


MODULE 1B: Introduction to cost terms and concepts basic understanding
MODULE 2: Cost Volume Profit Analysis [Chp 4] Planning
MODULE 3: Absorption and variable costing [Chp 5] Determination of product cost
MODULE 4: Overhead allocation (traditional and ABC Summarising costs/costs
methods) [Chp 6] accumulation for the purpose
of determining a product cost
Summarising costs/costs
MODULE 5: Job costing [Chp 7]
accumulation for the purpose
of determining a product cost
Summarising costs/costs
MODULE 6: Process costing [Chp 8] accumulation for the purpose
of determining a product cost
Summarising costs/costs
MODULE 7: Joint and by-product costing [Chp 9] accumulation for the purpose
of determining a product cost
MODULE 8: Budgeting process [Chp 12] Planning
MODULE 9: Standard costing [Chp 13] Planning and controlling

You might also like