Chapter 1: Management, the Controller, and Cost Accounting

Management

 Sets objectives, making decisions, giving orders, establishing policies, providing work and
rewards, and hiring people to carry out policies.
Notes: oversee the overall operation of an organization
 Planning and control.

Three groups:

 Operating management
 Middle management
 Executive management

Functions of Management

Planning

 Process of sensing external opportunities and threats; determining desirable objectives; and
employing resources to accomplish these objectives.
 Requires participation and coordination.
 Kinds of plans:
o Strategic plans
o Long-term plans
o Short-range plans

Organizing

 Establishment of the framework within which activities are to be performed.

 Requires bringing the many functional units of an enterprise into a coordinated structure and
assigning authority and responsibility to individuals.
 Involves establishment of functional divisions, department, sections, or branches.

Control

 Management’s systematic effort to achieve objectives.

 Comparing actual results with plans

Planning and Control

Authority: power to direct others

Responsibility: obligation

Accountability: reporting results to higher authority

The Controller
  Responsible for accounting function
 Responsible for observing methods of planning and control throughout the enterprise and for
proposing improvements in them.
 Issues performance reports
 Advices managers of activities requiring corrective actions (Management by exception)

Role of Cost Accounting

Cost department

 Under the supervision of the controller

 Analyzes costs and issues performance reports to managers for use in controlling and
improving operations

Benefits

 Creating and executing plans and budgets

 Establishing costing systems (control and reduce costs and improve quality)
 Controlling physical quantities of inventories
 Determining product cost and price
 Determining company costs and profit
 Choosing two or more alternatives that might alter revenues or costs

Types of Accountants

 Financial Accountants provide information to external parties

o Investors
o Creditors
o Regulators
 Managerial Accountants provide information to internal users
o Managers
 Cost Accountants provide information to both internal and external users
o Product cost information

Ethical standards and Management Accounting

1. Competence
2. Confidentiality
3. Integrity
4. Objectivity

Competence

 Maintain professional competence through ongoing development of their knowledge and skills;
 Perform duties in accordance to laws, regulations and standards;
 Prepare complete and clear reports.

Confidentiality
 Refrain from disclosing confidential information;
 Monitor the activities of the subordinations to maintain confidentiality;
 Refrain from using or appearing to use confidential information acquired.

Integrity

 Avoid conflict of interest;

 Refuse any gift, favor, or hospitality that would influence their actions;
 Refrain from either actively or passively subverting the attainment of the organization’s goal.

Objectivity

 Communicate information fairly;

 Disclose fully all relevant information that could reasonably influence an intended user’s
understanding of the reports, comments, and recommendations presented.