Acc 2033 introduction
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    Acc 2033 introduction Acc 2033 introduction Presentation Transcript

    • Chapter 1 Managerial Accounting
    • Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.
    •  According to the Institute of Management Accountants (IMA): "Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy"
    •  The American Institute of Certified Public Accountants(AICPA) states that management accounting as practice extends to the following three areas: • Strategic management—advancing the role of the management accountant as a strategic partner in the organization. • Performance management—developing the practice of business decision-making and managing the performance of the organization. • Risk management—contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.
    •  The Institute of Certified Management Accountants(ICMA), states "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation of the undertaking".
    •  Management accountants therefore are seen as the "value-creators" amongst the accountants. They are much more interested in forward looking and taking decisions that will affect the future of the organization, than in the historical recording and compliance (score keeping) aspects of the profession.  Management accounting knowledge and experience can therefore be obtained from varied fields and functions within an organization, such as information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc.
    •  The differences between management accounting and financial accounting include: • Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders • Financial accounting is required by law while management accounting is not. Specific standards and formats may be required for statutory accounts such as in the I.A.S International Accounting Standard within Europe. • Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost centers.
    •  Managerial accounting is used primarily by those within a company or organization. Reports can be generated for any period of time such as daily, weekly or monthly. Reports are considered to be "future looking" and have forecasting value to those within the company.  Financial accounting is used primarily by those outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company.
    • Financial Accounting Management/ Managerial Accounting Financial accounting is used primarily by those outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company. Managerial accounting is used primarily by those within a company or organization. Reports can be generated for any period of time such as daily, weekly or monthly. Reports are considered to be "future looking" and have forecasting value to those within the company. Financial Accounting, on the other hand, concentrates on the production of financial reports, including the basic reporting requirements of profitability, liquidity, solvency and stability. Reports of this nature can be accessed by internal and external users such as the shareholders, the banks and the creditors. Management Accounting is the branch of Accounting that deals primarily with confidential financial reports for the exclusive use of top management within an organization. These reports are prepared utilizing scientific and statistical methods to arrive at certain monetary values which are then used for decision making. Such reports may include: -Sales Forecasting reports, budget analysis and comparative analysis, feasibility studies, Merger and consolidation reports
    •  Management accounting principles (MAP) were developed to serve the core needs of internal business managers to improve decision support objectives, internal business processes, resource application, customer value, and capacity utilization needed to achieve corporate goals in an optimal manner.  Another term often used for management accounting principles for these purposes is managerial costing principles. The two management accounting principles are: • Principle of Causality (i.e., the need for cause and effect insights) and, • Principle of Analogy (i.e., the application of causal insights by managers in their activities).
    •  These two principles serve the management accounting community and its customers – the managers of businesses.  The principles are incorporated into the Managerial Costing Conceptual Framework (MCCF) along with concepts and constraints to help govern the management accounting practice. The framework ends decades of confusion surrounding management accounting approaches, tools and techniques and their capabilities.
    •  The framework of principles, concepts, and constraints will drive the classification of management accounting practices in the profession to "enable a better understanding both inside the profession and outside, of the compromises that result from inappropriate principles".  Without foundational principles, managers and accounting professionals have no consistent footing on which to challenge or evaluate new theories of methods for managerial costing.
    •  Some management accounting methods are designed primarily to serve and comply with financial accountancy guidelines.  The importance of having distinct and separate principles exclusively for Management Accounting has received support and acknowledgement after almost a century of work on the topic.  The idea that separate management accounting principles exist for managerial decision support distinct from financial reporting needs is now recognized by professional accounting bodies such as theInternational Federation of Accountants Professional Accountants In Business Committee and the Institute of Management Accountants Managerial Costing Conceptual Framework (MCCF) Task Force.