MANAGEMENT ACCOUNTING

MANAGERIAL ACCOUNTING
MANAGEMENT Is a field of Accounting that provides economic and financial
information for managers and other internal users.
Involves coordinating and overseeing the work activities of others so
that activities are completed efficiency (doing things right) and
effectively ( doing the right thing) – Robbins & Coutler MANAGEMENT ACCOUNTING
Is the branch of accounting tthat produces information for managers
Functions of Management within an organization. It is the process of identifying, measuring ,
accumulating, analyzing, preparing, interpreting and communicating
Planning information that helps managers fulfil organizational objectives.
 Maximize short term profit and market share Note: Managerial accountants have an ethical obligation to their
 Commit to environmental protection and social programs companies and the public. Managerial accountants in the
 Add value to the business performance of their duties has four areas of responsibilities a)
competence b) confidentiality c) integrity and d) objectivity.
Directing
Managerial Accounting has Three Board objectives:
 Coordinate diverse activities and human resources
 Implement planned objectives provide incentives to  To provide information for planning the organizations action
motivate employees  To provide information for controlling the organizations
 Hire and Train employees actions
 Produce smooth running operation  To provide information for making effective decisions

Activities where information needs of mangers and other user:

Controlling
1. Planning- involves establishing goals and specifying how to
 Keeping activities on track
achieve them. Budget is usually part of planning
 Determine whether goals are met
2. Controlling- involves feedback to ensure that the plan is
 Decide changes needed to get back on track
being properly executed or modified as circumstances
 May use an informal or formal system of evaluations
change. Performance Report compares budgeted data to
actual data in an effort to identify and learn from excellent
FUNCTIONS OF TREASURER AND CONTROLLER performances and to identify and eliminate sources of
unsatisfactory performance. Performance reports can be
Treasurer used as one of many inputs to help evaluate and reward
 Custodian of the corporations fund employees
 Responsible for maintain the company’s cash position 3. Decision- Making- involves selecting a course of action
from competing alternatives.
Controller

 Maintaining the accounting record CONTROLLER VS. TREASURER

 Maintaining an adequate system of internal control
 Preparing financial statements, tax returns and internal In a corporation, the financial responsibilities are probably conducted
reports by the controller, treasurer and chief financial officer ( financial vice
president). The activities of the controller and treasurer fall under the
umbrella of finance.
MANAGEMENT ACCOUNTING
The controller is the chief accountant and Is involved in the also results in fewer defects, less wasted effort, and quicker
preparation of financial statements, tax returns the annual report and customer response times than traditional production methods.
Securities and Exchange Commission (SEC) Filings. The controllers
(JIT) Just in Time manufacturing Methods, which have significantly
function is primarily assuring that funds are used efficiently. He or
lowered inventory levels and costs for many companies are one
she is primarily concerned with collecting and presenting financial
innovation that resulted frpm the focus on the value chain. Under the
information. They report their analysis of the financial implications of
JIT manufacturing method, goods are manufactured or purchased just
decisions to top management.
in time for sale.
The Treasurer’s function, in contrast, is primarily external. The
However JIT also necessitates increased emphasis on product.
treasurer obtains and manages the corporations capital and is
Because JIT companies do not have excess inventory on hand, theu
involved with creditors, shareholders and investors and bond
cannot afford to stop production because of defects or machine
issuances and governmental regulatory bodies. The treasurer is
breakdowns. If they have to stop production, deliveries will be delayed
responsible for managing corporate assets (e.g. accounts receivable,
and customer will be unhappy.
inventory) and debt, planning finances and capital expenditures,
obtaining funds, formulating credit policy and managing the As a consequence, many companies now focus on total quality
investment portfolio. management to reduce defects in finished products, with the goal of
zero defects. The TQM philosophy has been employed by some of the
CURRENT FOCUS OF MANAGERIAL ACCOUNTING most successful businesses to improve all aspects of the value chain.

Another innovation, the Theory of Constraints, Involves identification

A Business Process is a series of steps that are followed in order to of “bottlenecks”= constraints within the value chain that limit a
carry out some task in a business. These steps often span company’s profitability. Once a major constraint has been identified
departmental boundaries, thereby requiring managers to cooperate and eliminated, the company move son to fix the next most significant
across functional departments. The term value chain is often used to constraint.
describe how an organization’s functional departments interact with Technology has played a big role In the focus on the value chain and
one another to form business process. A value chain consists of the the Implementation of lean manufacturing enterprise resource
major business functions that add value to a company’s products and planning. (ERP) systems, such as those provided by SAP, provide a
services. comprehensive, centralized , integrated source of information to
manage all major business process- from purchasing to
manufacturing to sales to human resources. SAP (System applications
and Products) is one of the most popular ERP systems.
Managers frequently use a process management method known as
lean thinking, or what is called Lean Production in the manufacturing
sector. Lean Production is a management approach that organizes
6 KEY SIX SIGMA PRINCIPLES
resources such as people and machines around the flow of business
process and that only produces units in response to customer orders.
It Is often called just-in-time production because products are only
1. FOCUS IS ALWAYS ON THE CUSTOMER
manufactured in response to customer orders and they are completed
2. IMPROVEMENT IS A CONTINUOS PROCESS
just-in-time to be shipped to customers.
3. REDUCING PROCESS VARIATION IS CRITICAL
Traditional manufacturing methods that organize work 4. ELIMINATING WASTE ENCHANCES OUTCOMES
departmentally and that encourage departments to maximize their 5. LEADERSHIP DEVELOPMENT IS CRUCIAL FOR CONTINUED
output even if it exceeds customer demand and bloats inventories. SUCCESS
While in lean thinking only allows production in response to customer 6. DEFINE AND CONTROLL ALL PROCESS
orders, the number of units produced tends to equal the number of
units sold, thereby resulting in minimal inventory. The lean approach
MANAGEMENT ACCOUNTING
BUSINESS ETHICS
All employees within an organization are expected to act ethically in
their business activities. Given the importance of ethical behaviour to
corporations and their owners (stockholders), an increasing number
of organizations provide codes of business ethics for their employees.

THE ETHICAL STANDARDS ARE:

1. MAINTAIN PROFESSIONAL COMPETENCE
2. PRESERVE CONFIDENTIALLITY
3. UPHOLD THEIR INTEGRITY
4. PERFORM DUTIES WITH CREDIBILITY

COMPANY CODES OF ETHICAL CONDUCT

To promote ethical behaviour by managers and employees,

organizations commonly establish standards of conduct referred to
as Company codes of conduct. A quick review of various corporate
codes of conduct of different companies show some common grounds.
List of corporate values includes integrity, trust, diversity, high
performance, responsibility, growth, fairness, impartially, full
compliance with all applicable laws and regulations, prohibit the
acceptance of kickbacks and improper gifts, insider trading and
misappropriation of corporate information and assets.

CORPORATE GOVERNANCE
Refers to the framework of policies and guidelines that information a
company’s conduct decision making and practice. The infrastructure
is built upon four key principle: Accountability, transparency, fairness
and responsibility.

1. ETHICAL BEHAVIOUR
2. FINANCIAL REPORTING
3. HIRING AND FIRING POLICIIES
4. LAW COMPLIANCE
5. CORPORATE STRATEGY
6. COMPENSATION
7. RISK MANAGEMENT