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Introduction to managerial accounting
 

Introduction to managerial accounting

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    Introduction to managerial accounting Introduction to managerial accounting Presentation Transcript

    • INTRODUCTION TO MANAGERIAL ACCOUNTING 1
    • MANAGERS EMPLOYEES USERS GOVERNMENTSHAREHOLDERS / POTENTIAL INVESTORS CREDITORS / PROVIDERS LOAN 2
    • DEFINITION• MA is concerned with the provision of information to people within the organization to help them make better decisions• FA is concerned with the provision of information to external parties outside the organizaation 3
    • 1)Cost accounting is the process of determining and accumulating the cost of product or activity whereas2)Management Accounting provides information to internal users in organisation to make better decision and improve efficiency and effectiveness of existing operation. This concerns forecasting and monitoring business activities, reporting to both internal (employees) and external parties (shareholders 4
    • Objectives of management and cost accounting1)to allocate costs between cost of goods sold and inventories for internal and external profit reporting2)provide relevant information such as selling price, cost analysis to help managers to make better decisions3)provide information for planning, controlling of the cost and performance measurement. 5
    • MANAGEMENT ACCOUNTINGManagement accounting is concerned with the provision andinterpretation of information required by management of all levels for the following purposes: *Formulating the policies of the organization *Planning the activities of the organization in the long, medium and short term i.e . strategic through to operational planning *Controlling the activities of the organization *Decision making that is the process of choosing between alternatives *Performance appraisal at strategic, departmental and operational levels 6
    • 7
    • OBJECTIVES OF COSTING 8
    • DIFFERENCES BETWEEN FINANCIAL ACCOUNTING AND COST AND MANAGEMENT ACCOUNTINGDIFFERENCES FINANCIAL ACCOUNTING COST AND MANAGEMENT ACCOUNTINGUsers orientations External users- shareholders, Internal users- management creditors, customer, wide users for decision making purposeLegal /rules Drafted accounting GAAP – Drafted according to General Accepted management suitability Accounting ProcedureTime frame Historical data – report on the Futuristic – future events that past event are planned to happenReport frequency Well defined – annually , Whenever needed- daily, semi- annually weekly, monthlySegment reporting Describe whole organization Only covered part of organization (dept ) – production departmentDegree of precision Objectivity in principle , easy to More subjective – can be 9 understand
    • SIMILARITIES BETWEEN FINANCIAL ACCOUNTING AND COST AND MANAGEMENT ACCOUNTINGFEATURES FUNCTIONRecord –keeping Concerned with selecting, measuring and accumulating of data concerning business transactionsPerformance evaluation Assess performance and find any variance between actual and planned performance for further action to be takenDecision making Involves in choosing the best between alternativesPrinciples of stewardship Carry the responsible to appropriately record and report performanceAccounting system Procedures and guidelines 10 are
    • CHARACTERISTICS1) RELEVANCE2) ACCURACY3) TIMELINESS4) COST EFFECTIVENESS5) UNDERSTANDABILITY 11
    • FUNCTION OF MANAGEMENT 12
    • Roles of management accountant in the managerial process1)The management accountant assists in the setting up of information system relating to cost accounting matters. This system is a value added to the managers. For example, for production manager, by using the card of standard cost he may highlight information such as breakdown of the production elements of a particular product to be produced. 13
    • 2)The management accountant advises andmonitors the system so that it runs smoothly as expected and that information are updated regularly. 3)The management accountant interprets the figures reported and explains how thedata and information can be made useful. Healso makes recommendations for alternative courses of actions in a decision making process. 4)The management will use his expertise to analyse raw data and present them in a more useful format to the management 14
    • Roles of management accountants in the 21st century: 1) Focus not only on financial information but also non-financial information such as quality of goods and services and customer satisfaction 2)Use of external information such as information on the external environment and competitors to maintain competitive advantage3)More forward looking rather than looking into the past e.g. proposal on “looking beyond budgeting” 4)Changes in the environment are becoming the norm, therefore management accountants need toadopt to changes through the application of relevant management accounting approaches e.g. ABC, target costing 15