Republic of the Philippines

NUEVA VIZCAYA STATE UNIVERSITY

Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019

College: College of Business Education

Campus : Bayombong Campus

DEGREE BSBA COURSE

PROGRAM NO. ACCTG 2
SPECIALIZATION Financial COURSE
Management TITLE Managerial Accounting
YEAR LEVEL 3rd Year TIME IM
FRAME WK NO. 1-2 NO. 01

I. UNIT TITLE/CHAPTER TITLE: MANAGEMENT ACCOUNTING: AN OVERVIEW

II. LESSON TITLE :

Lesson 1: Management Accounting Definition
Lesson 2: Objective, Purpose and Scope of Management Accounting
Lesson 3: Comparison of Management Accounting and Financial Accounting
Lesson 4: Relationship between Management Accounting & Cost Accounting
Lesson 5: Organization Aspect of Management Accounting
Lesson 6: Controllership Role and Function
Lesson 7: Contemporary Management Techniques

III. LESSON OVERVIEW

The growth of management accounting has been brought about by the continuing growth of
business organizations, the development of scientific management and the consequent need of
management for economic data to serve as a basis in the decision-making process.

The functions of accounting at its inception were to determine the profitability of ventures and to
account for the assets, liabilities and the net change in owner’s equity. Its role has gradually
broadened with the growth of business organizations. The introduction of the corporate form of
ownership brought with it the responsibility to protect the interests of the stockholders, creditors
and other third parties. This responsibility and passage of tax measures, particularly on net
income, gave rise to the existence of FINANCIAL ACCOUNTING. The industrial revolution
brought with it a new challenge to accountants- to provide management with a reliable basis in
pricing their output and in profit measurement. This new role of accountant gave rise to the
development of COST ACCOUNTING.

All the forgoing developments resulted in a growing awareness of the potential uses of
accounting data in management decisions and consequent dependence of management on the
accountant for assistance in the performance of its functions. The accountant, on the other
hand, conscious of his supporting role in management, keeps on developing himself
professionally to be in a better position to perceive the needs of management and provide the
latter with relevant and timely information.

IV. DESIRED LEARNING OUTCOMES:

1. Discuss the nature, scope, objective and responsibilities of management accounting.

2. Identify the major differences and similarities between Management Accounting and
Financial Accounting.
3. Explain the relationship between management accounting and cost accounting.
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INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019
4. Discuss Controllership and its relation to the management.
5. Identify the current focus of Management Accounting.

V. LESSON CONTENT

Lesson 1: Management Accounting Definition

Management Accounting involves the application of appropriate techniques and concepts to

economic data so as to assist management in establishing plans for reasonable economic
objectives and in making the rational decisions with a view toward achieving these objectives.

It is the process of identification, measurement, accumulation, analysis, preparation, interpretation

and communication of financial information, which is used by management to plan, evaluate and
control activities within an organization. It also comprises the preparation of financial reports for
non-management groups such as shareholders, creditors, regulatory agencies and tax authorities.

Lesson 2: Objective, Purpose and Scope of Management Accounting

Objective
Management Accountants provides information and participate in the management process. They
select and provide, to all levels of management information needed in:
1. planning, evaluating and controlling operations, decision making
2. safeguarding the organization’s assets
3. Communicating with the interested parties outside the organization, such as shareholders
and regulatory bodies.

Scope
Managerial Accounting is concerned primarily with providing information to internal managers who
are charged with planning and controlling the operations of the firm and making a variety of
management decisions. It generally includes:
1. Data Accumulation or Score Keeping which enables both internal and external parties to
evaluate organizational performance and position.
2. Interpreting and reporting of information that helps manager to focus on operating problems,
opportunities as well as in-efficiencies. This is commonly associated with current planning
and control and the analysis and investigations of recurring routine internal accounting
reports to signal situations in which management action may be required.
3. Problem Solving or quantification of the relative merits of possible courses of action as well
as recommendations as to the best procedure. This is commonly associated with non-
recurring decisions.

Specifically, Managerial Accounting provides a system which allows management to receive the
necessary information used in performing its administrative functions which includes:

1. Planning which involves setting of goals for the firm, evaluating the various ways to meet
the goals and picking out what appears to be the best way to meet the goals.
2. Controlling which involves the evaluation of whether actual performance conforms with
planned goals.
3. Decision making which involves determination of predictive information for making
important business decisions.

Control of organization is achieved by evaluating the performance of managers and the operations
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Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019
for which they are responsible. Managers are evaluated to determine how their performance should
be rewarded or punished, which in turn motivates them to perform at a high level. The reports used
to evaluate the performance of managers and the operations the control are referred to as
Performance Reports. Management by Exception is the principle that managers typically
fallowed when using performance report. This means that managers investigate significant
deviations from plans and they do not investigate minor deviations or departure from plans.

Management by Objective. A management approach designed to focus on the definition and

attainment of overall and individual objectives with the participation of all levels of management.

Purpose
From the previous discussion, it can be gathered that the basic objective of management
accounting is to communicate quantitative information to management to be able to:
1. Define the basic objectives and policies of the entity;
2. Develop specific goals and plans in keeping with company objectives and policies;
3. Communicate such plans to all levels;
4. Monitor and evaluate performance

Lesson 3: Comparison of Management Accounting and Management Accounting

Financial Accounting involves the systematic recording of business transactions, governed by a

body of generally accepted principles (GAAP) leading to the preparation of financial statements for
the use of various interested parties, internal as well as external.

Management Accounting is concerned with providing financial information to management that

will be useful in making decisions about the operations of the business.

The specific difference between Financial Accounting (FA) and Management Accounting (MA) are
as follows:
1. As to objective:
FA: To provide data for both internal and external users.
MA: To provide data for internal users within the business organization.

2. As to compliance with GAAP

FA: Financial data should be recorded and presented in accordance with GAAP.
MA: Reports need not to be presented in conformity with GAAP to be able to present
more useful data to management.

3. AS to emphasis on the future

FA : This primarily provides summaries of past financial transaction.
MA: This has a strong future orientation

4. As to relevance and flexibility of data

FA: All-purpose reports with historical data are prepared for used of different parties.
MA: Special purpose reports containing both historical and projected data are prepared
to meet the needs of specific users. They contain information, quantitative and
qualitative, that are relevant for a particular decision.

5. As to emphasis on precision and timeliness of report

FA: Reports are still useful even if submitted late and show summaries of financial
consequences of actual and past activities where precision is required.
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INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019
MA: Timeliness is often more important than precision to managers. Prompt submission
of the report is necessary to preserve its usefulness and good estimates may be enough to
make good decisions.

6. As to reporting requirements of an organization

FA: This is primarily concerned with reporting for the company as a whole.
MA: This focuses reporting on the parts or segments of the company.

Similarities Between Financial and Managerial Accounting

Financial and Managerial Accounting both deals with financial information. Managers also make
significant use of financial accounting reports and external users occasionally request financial
information that is generally considered appropriate for internal users.

Lesson 4: Relationship Between Management Accounting And Cost Accounting

Cost Accounting is a systematic set of procedures for recording and reporting measurements of the
cost of manufacturing goods and performing services in the aggregate and in detail. It includes
methods for recognizing, classifying, allocating, aggregating and reporting such costs and
comparing them with standard costs.

Management accounting is a newer interest of cost accounting. Its purpose is to provide managers
with information which aids decision. There are no generally accepted principles which specify how
management accounting information is to be reported. While systems such as direct costing and
standard costing exist m management accounting, each accounting report should be tailored to the
needs of the decision and the decisions maker. The most effective systems result when the
manager-decision maker and the accountant work together until the accountant understands the
decision to be made and the manager understands the source of information that the accountant
will report.

Lesson 5: Organization Aspect of Management Accounting

The two types of authorities in the organizational structure are line and staff.

Line authority is the authority to command action or give orders to subordinates. Line managers
are directly responsible for attaining the objectives of the business firm as efficiently as possible.
Sales and production managers typically have line authority. Staff authority is the authority to
advise but not command others; it is exercised laterally or upward. Staff managers give support,
advice and service to line departments. Examples of staff authority are found in personnel,
purchasing, engineering and finance.

The accounting function is usually “staff, with responsibility for providing line managers and also
other staff managers, with specialized services. This includes advice and help in the areas of
budgeting, controlling, pricing and special decisions.

Except for exerting line authority over his department, the chief accounting officer usually the
controller generally fills the staff role in his company as contrasted with the line roles of sales and
production executives. Theoretically, the controller transmits the best accounting procedures to be
followed by the line people to the president who will communicate such through a manual of
instructions. In practice however, the controller holds delegated authority from top line management
to direct the line people how to apply these procedures. This is known as functional authority
which is the right to command action laterally or downward with regard to a specific function or
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NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019
specialty.

Lesson 6: Controllership Role and Function

Controllership is the practice of the established science of control which is the process by which
management assures itself that the resources are utilized according to plans, in order to achieve
the company’s objectives.

Controller is the financial executive primarily responsible for management accounting and financial
accounting. This officer has the overall responsibility for all the accounting activities within the
organization.

In most organizations, the top managerial accounting position is held by the controller.

Treasurer is the person in-charge of raising cash for operations and managing cash and non-cash
assets.

Role of the Controller

The chief accounting executive of an organization is called a controller who combines the
responsibilities for accounting, auditing, budgeting, profit planning, performance reporting, tax
control and other corporate activities.

The controller’s authority is basically staff authority in that the controller’s office gives advice and
service to other departments. However, in his own department, he has line authority. In the modem
concept of controllership, it is maintained that the controller does control in a special sense. That is,
by reporting and interpreting relevant data, the controller exerts a force or influence that impels
management toward logical decisions consistent with objectives.

Functions of the Controller

The principal functions of the controller are:

1. Planning for control. To establish, coordinate and maintain, through authorized

management an integrated plan for the control of operations. Such a plan would provide to
the extent required in the business, cost standards, expense budgets, sales forecasts, profit
planning and program for capital investment and financing, together with the necessary
procedure to effectuate the plan.

2. Financial Reporting and Interpretation. To measure performance against approved

operating plans and standards, and to report and interpret the results of operations to all
levels of management.

This function includes the design, installation and maintenance of accounting and cost systems and
records, the determination of accounting policy and the compilation of statistical records as
required.

3. Management audit. To measure and report on the validity of the objectives of the business
and on the effectiveness of its policies, organization structure and procedures in attaining
those objectives. This includes consulting with all segments of management responsible for
policy and action concerning any phase of the operation of the business as related to the
performance of this function.

4. Internal audits. To establish and maintain adequate internal control, continuing internal
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INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019
auditing program and assuring proper insurance coverage of the firm’s assets.

5. Tax administration. To supervise all matters relating to taxes.

6. Government reporting. To submit reports required by government agencies such as BIR,

SEC, SSS, etc.

7. Economic appraisal. To interpret and report on the effect of external influences such as
economics, social or political as they affect the operations of the business.

Comparison of the Controller’s functions with the Treasurer’s functions

Controllership Treasurership
1. Planning for control 1. Provision of Capital
2. Financial reporting and 2. Investor relations
interpretation 3. Short-term financing
3. Management audit 4. Banking and custody of funds
4. Internal audit 5: Credit and collections
5. Tax administration 6. Investments
6. Government reporting 7. Insurance
7. Economic appraisal

Lesson 7: Contemporary Management Techniques

1. JUST-IN-TIME (JIT) is the philosophy that activities are undertaken only as needed or
demanded. JIT is a production system also known as “pull-it-through approach”, in which materials
are purchased and units are produced only as needed to meet actual customer demand. In a JIT
system, inventories are reduced to the minimum and in some cases, zero.

CHARACTERISTICS:
1. Elimination of all activities that do not add value to the product or service.
2. Commitment to a high level of quality.
3. Commitment to continuous improvement in the efficiency of an activity
4. Emphasis on simplifications and increased visibility to identify activities that do not add
value.

2. TOTAL QUALITY MANAGEMENT is a technique in which management develops policies and

practices to ensure that the firm’s products and services exceed customer’s expectations.

CHARACTERISTICS:
1. focus on serving customer
2. systematic problem solving using teams made up of front line workers.

3. PROCESS REENGINEERING is an approach where a business process is diagrammed in

detail, questioned and then completely redesigned in order to eliminate unnecessary steps, to
reduce opportunities for errors and to reduce costs.

This process can yield to the following anticipated results:

 Process is simplified
 process is completed in less time
 Costs are reduced, and
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 Opportunities for errors are reduced.

4. MASS CUSTOMIZATION is a management technique in which marketing and production

processes are designed to handle the increased variety that results from delivering customized
products and services to customers.

5. BALANCED SCORECARD is an accounting report that includes the firm’s critical success
factors in four areas: financial performance, customer satisfaction, internal business process and
innovation and learning

5. ACTIVITY-BASED COSTING AND MANAGEMENT is using information about activities to

manage many aspects of an organization, and focuses on processes and on task and
activities within processes, rather than simply managing costs.

7. THEORY OF CONSTRAINTS is a sequential process of identifying and removing constraints in

a system.

8. LIFE CYCLE COSTING is a management technique to identify and monitor the costs of product
through its life cycle. The steps include
1. research and development
2. product design, including prototyping, target costing and testing
3. manufacturing, inspecting, packaging and warehousing
4. marketing, promotion and distribution
5. sales and service

9. TARGET COSTING involves the determination of the desired cost for a product or the basis of a
given competitive price so that the product will earn a desired profit.

10. COMPUTER AIDED DESIGN AND MANUFACTURING is the use of computers in product
development, analysis, and design modification to improve the quality and performance of the
product. COMPUTER AIDED MANUFACTURING is the use of computers to plan, implement and
control production.

Lesson 8: Current Focus Of Management Accounting

The design of a management accounting system should be guided by the challenges facing
managers. There are atleast four themes common to many companies, namely:

1. Customer focus: A focus on customer value means that the management accounting
system should produce information about both realization and sacrifice.

2. Value chain and supply chain analysis: The term value refers to the increase in the
usefulness of the products or service and as a result its value to the customer.

Internal value chain is the set of activities required to design, develop, produce, market and deliver
products or services to customers. If customer values are emphasized, managers are forced to
determine which activities in the value chain are important to customers.

Business Functions Making Up The Value Chain

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2019
Research and Product Manufacturing Marketing Distribution Customer
Development Design Service

Management Accounting

3. Key Success Factors

 CROSS-FUNCTIONAL TEAMS. Cross-functional managerial teams bring together
production and operations managers, marketing managers, purchasing and material-
handling specialists, design engineers, quality management personnel, and managerial
accountants to focus their varied expertise and experience on virtually all management
issues. If products are to be designed and manufactured with the customers’ needs in mind,
a cross-functional approach is crucial. Marketing managers have the best feel for customer
needs, and production managers are up on the latest in manufacturing technology. Design
engineers know how to build the functionality into a product that customers demand, and
purchasing managers can acquire the materials, parts, and services necessary to get the
job done. Managerial accounting information is the glue that holds the cross-functional team
together. The managerial accountant designs an information system and provides data
ranging across all aspects of the organization’s internal operations and external
environment. Then the managerial accountant works as an integral member of the cross-
functional team, interpreting information and analyzing the implications of decision
alternatives. Working together, the cross-functional team creates value for the organization
by meeting the customer’s needs in the most effective manner possible.

 COMPUTER-INTERGRATED MANUFACTURING is the manufacturing system that totally

integrates all office and factory functions in a company via a computer-based information
network.

 TIME BASED COMPETITION. A company can gain an important edge over its competitors
by reducing the time it takes to develop a new product and transporting the product in the
market more quickly. Thus, the time to market becomes a critical objective for many
companies.

4. Continuous Improvement and Benchmarking

Continuous improvement is the constant effort to eliminate waste, reduce response time, simplify
the design of both product and processes, an improve quality and customer service.

Benchmarking is a process, by which a firm identifies its critical success factors, studies the best
practices of other firms and implement improvements in the firms’ process to match or beat the
performance of those competitors.

VI. LEARNING ACTIVITIES

A. Answer the following question briefly.

1. Discuss the nature, scope and objective of management accounting.

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Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:IM-ACCTG2-2S-2018-
2019
2. Identify the major differences and similarities between Management Accounting and
Financial Accounting.
3. Explain the relationship between management accounting and cost accounting.
4. Discuss Controllership and its relation to the management.
5. Identify and explain the current focus of Management Accounting.

B. Complete the following comparison table between managerial accounting and financial
accounting.

Financial Accounting Managerial Accounting

1. Primary users

2. Type of reports

3. Frequency of reports

4. Content of reports

VII. ASSIGNMENT

A. The following is a list of terms related to management functions, company’s

organizational structure and managerial practices. Match each of the above terms
with the statement below that best describes the term. Write the letter beside the
number.
a. Planning g. Directing l. Controlling
b. Board of directors h. Chief Financial Officer m. Treasurer
c. Controller i. Line Position n. Chief Executive officer
d. Staff Position j. Theory of Constraints o. Activity-based Costing
e. Just-in-time inventory k. Balanced Scorecard p. Value Chain
f. Enterprise resource Planning

K 1. A performance measurement technique that attempts to consider and evaluate all

aspects of performance using financial and non-financial measures in an integrated fashion.
J 2. An approach used to identify those factors that limit a company’s productive capacity and
to address those limitations so as to maximize profitability.
O 3. A method used to allocate overhead to products based on each product’s use of the
activities that cause the incurrence of the overhead costs.
E 4. An approach used to reduce the cost associated with handling and holding inventory by
reducing the amount of inventory on hand.
P 5. The group of activities associated with providing a product or service.
F 6. A system that provides a comprehensive, centralized, integrated source of information
used to manage all major business processes.
N 7. Employee who has overall responsibility for managing the business.
I 8. Employees who are directly involved in the company’s primary revenue generating
activities.
H 9. Employees with overall responsibility for all accounting and finance issues.
B 10. Group of people elected by the shareholders that selects and oversees company
officers and formulated operating policies.
D 11. Employees who provide support services to those employees who are directly involved
in the company’s primary revenue-generating activities.

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reproduced for educational purposes only and not for commercial distribution,”
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2019
C 12. Employees who maintains accounting records and system of internal controls and
prepares financial statements, tax returns, and internal reports.
M 13. Employee who has custody of the company’s funds and maintains company’s cash
position.
L 14. The process of keeping the management’s activities on track.
G 15. It Involves the coordinating the diverse activities and human resources of a company to
produce a smooth running operation.

VIII. EVALUATION (via Google)

IX. REFERENCES

Agamata, F. (2019). Managerment Services, 2019 Edition, A Comprehensive Guide.

Conanan Educational Supply

Barfiled, J., Raiborn, C., Kinney, M. (2013). Cost Accounting: Traditions & Innovations,
5Th Edition. Singapore: Thomson Learnings Asia

Cabrera, Ma. Elenita and Cabrera, G. (2017). Management Accounting- Concepts and
Applications, 2017 Edition. Conanan Educational Supply

Harina, Ricardo M. (2012). Management Accounting for Informed Business Decisions.

Madaluyong City, Philippines: National Bookstore

Weygandt, J., Kieso, D., Kimmel, P., (2005). Managerial Accounting: Tools for Business
Decision Making, 3rd Edition. USA: Susan Elbe

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be
reproduced for educational purposes only and not for commercial distribution,”
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