MANAGERIAL (MANAGEMENT) ACCOUNTING

Management accounting focus on providing information to internal users, management,
to assist planning, control and enhancement of the business.

Accounting:
Recording
Reporting
Analysis for decision making

Accounting and management cycle:
Planning
Controlling
Organizing
Decision making

Managerial accounting
1. What are the goals?
2. Performance evaluation, control
3. Costing

Management accounting reports:
No specified format as in financial.
Four w’s of successful report presentation:
Why: why is report headed? Purpose?
Who: who will use report?
What: what information is relevant? Detail?
When: when needed? Timely info? Deadlines?

Cost accounting is a key element of management reporting.

Flow of product Cost:
Direct materials
Direct labor
Factory overhead
Working process
Finished goods
Balance sheet
Ending inventory
Income statement
Cost of goods sold

Cost assignment methods:
Job order costing
Process costing
Activity based costing
Joint processing
By-product
Alternatives for cost allocation

Cost classification:
Cost traceability: direct, indirect
Cost behavior: fixed, variable costs
Cost and operations: value added and non value added
Cost and reporting: product and periodical costs

Strategic cost management
Cost behavior is a function of strategic choices. Cost is not primarily a function of output volume.

Objectives:
Score keeping
Attention directing
Problem solving
Strategic positioning

Three underlying themes:
Value chain analysis
Cost driver analysis
Strategic positioning analysis

Budgeting
Master budget is a set of interrelated budgets that constitutes a plan of action for a specific time period.

Operating budgets
Sales budget
Production budget
Direct material budget
Direct labor budget
Factory overhead budget

Financial budgets
Cash budget
Budgeted income statement
Budgeted balance sheet

Capital expenditure budget
Purchase of long lived assets

Approaches to budgeting
Top down
Bottom up
Zero based

Budgets help answer the following:
Where we are going?
Where are we now?
Where have we been?

Time frames:
Single period budget
Rolling/continuous budget

Budget process:
Defines goals and objectives
Promotes analysis and focus on future
Motivates employees
Provide a basis for evaluating performance against base or expected results
Facilitates coordination of business activities
Provides early warning system

New management philosophies in managerial accounting:
Just in time JIT
Total quality management TQM
Activity based management ABM using activity based costing ABC models
GOAL –continuous improvement