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;
PLANNING Setting' up immediate and long-term goals.
 Deciding which alternative means would be best suited to attain the set goals.

Organizing involves:
ORGANIZING  Deciding how to utilize available resources a .plans are being carried out.
 Tackling activities such as staffing, subordinating, directing, motivating, etc .

Controlling involves:
CONTROLLING) - 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.

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 goa t s a n d
t h e m e t h o ds o f a c h i e v i n g t h em a n d d e v el o p a pl a n i n a c c o r d a n c e w i t h t h a t agreement.
The subordinate is then evaluated with reference to the agreed plan at the end of the
period.

Management by Exception is a technique of highlighting those which vary significantly from plans and
standards in line with the management principle that executive time should he 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

FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING

1. User of 'information Primarily for external users Exclusively for internal users (management)

2. G u idin g pri nc i pl e s 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. Purpos e/End r esult Financial reporting and compliance Decision-making

7. S o u r c e o f d a t a From company's (internal) info system From internal and external sources

8. A mo unt of det a i l Compressed and simplified Extensive and detailed

9. Focus of inform ation Foc us m ainly on busin ess as a whole Focus on segments and business as a whole

10.F r e q u e n c y Periodic (annually, quarterly) As frequent as need arises

11.T i m e o r i e n t a t i o n Mainly historical (past) data Future-oriented using current and past data

12.U n if y in g mo de l Assets Liabilities + Equity No unifying model or equation

 THE CONTROLLER: CHIEF MANAGEMENT ACCOUNTANT
C O NTR OL L ERSH I P - th e pr ac t ic e of th e e st a bli shed sc ienc e of c ont ro l, wh ic h i s t h e proc ess by wh ich
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 organization who has responsibility for the accounting aspect of management
control. It is a title given to a person hording the position of a chief management accounting
executive of a business enterprise. In many accounting texts and business literature, 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 over 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 controller 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 o ver 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 a treasurer, who is primarily concerned wit h
custody of funds. Consider the following:
CONTROLLER TREASURER
.

1. Planning and control 1. Provision of capital

2. Reporting and 2. I n v e s t o r r e l a t io n s
interpreting 3 . Short-term financing
3. Evaluating and 4 . B a n ki n g a n d cu sto dy
consulting 5, Credit and collection s
4. Tax administration 6. Investments
5. Government reporting 7, Insurance
6. Protection of assets
7. Economic appraisal

STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS

According to the Standards of Ethical Conduct set by the Institute of Management Accountants (I MA),
management accountants have a responsibility to...

COMPETENCE

CONFIDENTIALITY

INTEGRITY

OBJECTIVITY

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