STRACOSMAN: STRATEGIC COST MANAGEMENT
CHAPTER 1: Objectives, Role, and Scope of Management Accounting
SUMMARY NOTES BY: Mary Joy C. Nala, CB
BS ACCOUNTANCY 3B | 2nd SEMESTER A.Y. 2022-2023
What is management?
Main aspect
The process of planning, organizing, and controlling
tasks to realize the objectives of an organization.
Planning
Organizing
Setting the objectives
Staffing, Directing and Motivating
Controlling
Actual Vs. Standard
Management Accounting
- Application of appropriate techniques and
concepts in processing the historical and projected
economic data of entity to assist management in
establishing a plan for reasonable economic
objectives and in the making of a rational decision.
Management Advisory Services
- Providing advice and technical assistance to help
clients improve the use of their resources to
achieve their goals.
Basic Management Function
Planning
Controlling
Decision Making
Setting of goals
Evaluation Actual vs. Planned Goals
Determination of Predictive Information for business
decisions
Planning: Planning process may be short term or long term. Management is
extremely concerned with planning process, as effective planning leads a
business to reap desired results. By means of planning, a business
management can identify where it stands and what it takes to grow and develop
in a way as has been predetermined.
Controlling: As regards controlling, so far as the budgets are useful in
facilitating the planning process of a business, budgetary control is a good
means of controlling as well. Other techniques, such as, standard costing and
departmental operating statements are of great help in making controlling
measures. They are also helpful to take remedial measures in case of
deviations in the performance of business entity.
Decision-Making: It is through this process that the results are
communicated to the owners, superiors and subordinates. It includes
transmitting data highlighting necessary information, such as, progress
of business, financial position - to the required users. This enables
managers to highlight the issues that are worth and that they need
proper analysis, so that the intended results may be attained.
Management Accounting: Key Aspects
Information Processing
Assists Internal Users
Economic Decisions
Consultancy Services
Technical Assistance
Resource Utilization
Application of techniques and
approaches to process historical and
projected financial data
Internal users include the management
and those charged with governance
(aka Board of Directors)
Should be consistent with the economic
objectives set by the management
Rendered by a professional qualified by
education and technical ability
regarding a subject matter
Formulate an advice to the client
independently and
ethically
Efficient use of resources with a view of
achieving overall objectives
Management Advisory Services (MAS) vs. Financial
Accounting and Reporting (FAR)
User of Information
Applicable Standards
Information being
processed
Emphasized quality of
Information
Purpose
Detail of Information
Scope of Information
Frequency
Magnitude of
Estimates
Information Source
Reports
Management
Accounting
Management
Best Practice
Quantitative and
Qualitative
Relevance
Financial
Accounting
External users
PFRS/ GAAP
Decision Making
Extensive
Specific Segments
Financial Reporting
Summarized
Business as a
Whole
Periodically needed
As the need arises
Highly used
Accounting System
and Others
Recommendation
Quantitative
Reliability
Moderately used
Accounting System
(Bookkeeping)
Financial Reports
CIMA Code of Ethics
The CIMA code of ethics is based on the IFAC handbook
of the code of ethics for professional accountants, from the
International Ethics Standards Board of Accountants
(IESBA).
IESBA Principles
Integrity
Objectivity
Confidentiality
Professional Behavior
Professional Competence
and Due Care
Integrity: being straightforward, honest and truthful in all
professional and business relationships. You should not be
associated with any information that you believe contains a
materially false or misleading statement, or which is
misleading by omission.
Objectivity: not allowing bias, conflict of interest or the
influence of other people to override your professional
judgement.
Confidentiality: you should not disclose professional
information unless you have specific permission or a legal
or professional duty to do so.
Professional Behavior: comply with relevant laws and
regulations. You must also avoid any action that could
negatively affect the reputation of the profession.
Professional competence and due care: an ongoing
commitment to your level of professional knowledge and
skill. Base this on current developments in practice,
legislation and techniques. Those working under your
authority must also have the appropriate training and
supervision.
SUMMARY NOTES
Prof. Rica M. Quitoriano
BSA 3B
STRACOSMAN: STRATEGIC COST MANAGEMENT
CHAPTER 1: Objectives, Role, and Scope of Management Accounting
SUMMARY NOTES BY: Mary Joy C. Nala, CB
BS ACCOUNTANCY 3B | 2nd SEMESTER A.Y. 2022-2023
Roles and Activities of Controller and Treasurer
•
Controllership Function is the established
science of control which promotes the efficient use
of an entity’s resources in accordance with its
planned objectives.
•
•
•
Traditional management and it focuses on the
areas of planning and controlling
Deals with records, systems and processes to
attain the objectives of internal controls and
therefore, good managing.
Treasury Function, on the other hand, involves
the management of money and financial risk in a
business.
•
Deals with money, cash or wealth of an
organization.
Controllership Functions
1. Planning and Control
2. Reporting
3. Evaluation
4. Government Relations
5. Protection of Assets
6. Economic Appraisal
7. Tax Planning and
Administration
1.
2.
3.
4.
5.
6.
7.
Treasury Functions
Capital Financing/Provision for
Capital
Investor Relations
Short-Term Borrowings
Banking Relations and
Custodians
Credit and Collection
Investments
Insurance
objective of ascertaining, reducing and controlling costs. (Cost
accounting subject starts from graduation level)
Management accounting is the most recently developed branch of
accounting. It is concerned with generating accounting information
relating to funds, costs, profits, etc., as it enables the management in
decision making. We may say that management accounting addresses
the needs of a single user group, i.e., management.
The accounting system is part of the organization’s management
information system (MIS).
The cost accounting system, which accumulates data about the
costs of producing goods and services, is part of the organization’s
overall accounting system. It accumulates cost information for both
management accounting and financial accounting.
MANAGEMENT
ACCOUNTING
USERS OF REPORT
PURPOSE
Distinction among Management Accounting, Cost
Accounting and Financial Accounting
TYPES OF REPORTS
Basis
Objective
Financial
Accounting
Record
transaction and
determine
financial position
and profit or
loss.
Nature
Concerned with
historical data
Principle
Followed
Governed by
GAAP
Data Used
Data Qualitative
Aspects are not
recorded
Cost
Accounting
Management
Accounting
Ascertainment,
allocation,
accumulation
and accounting
for cost
To assist the
management in
decision-making
and policy
formulation
Concerned with
both past and
present recorded
(historical in
nature)
Certain principles
followed for
recording costs
Deals with
projection of
data for the
future (futuristic
nature)
Only quantitative
aspect used
recorded
No set principles
are followed in it
BASIS OF REPORTS
STANDARDS OF
PRESENTATION
REPORTING ENTITY
Uses both
quantitative and
qualitative
concepts
PERIOD COVERED
Financial Accounting is that branch of accounting which records
financial transactions and events, summarizes and interprets them
before communicating the results to the users. It determines profit
earned or loss incurred during an accounting period and the financial
position as on the date when accounting period ends. The end product
of financial accounting I the profit & loss account for the period ended
and the Balance Sheet as on the last day of accounting period.
Internal users: officers
and managers
To provide internal
users with information
that may be used by
managers in carrying
out the functions of
planning, controlling,
decision-making, and
performance
evaluation.
Different types of
reports, such as
budgets, financial
projections, cost
analyses, etc.,
depending on the
specific needs of
management.
Reports are based on
a combination of
historical, estimated,
and projected data.
In preparing reports,
the management of a
company can set rules
to produce information
most relevant to its
specific needs.
Focus of reports is on
the company’s value
chain, such as a
business segment,
product-line, supplier,
or customer.
Reports may cover
any time period – year,
quarter, month, week,
day, etc. Reports may
be required as
frequently as needed.
FINANCIAL
ACCOUNTING
External users:
stockholders, creditors,
concerned government
agencies.
To provide external users
with information about the
organization’s financial
position and results of
operations.
Primarily financial
statements and the
accompanying notes to
such statements.
Reports are based almost
exclusively on historical
data.
Reports are prepared in
accordance with generally
accepted accounting
principles and other
pronouncements of
authoritative accounting
bodies.
Financial reports relate to
the business as a whole.
Reports usually cover a
year, quarter, or month.
Cost Accounting is a branch of accounting is concerned with
ascertaining cost of products, operations, processes or activities. It is
that branch of accounting which deals with recording costs with the
SUMMARY NOTES
Prof. Rica M. Quitoriano
BSA 3B