CHAPTER 1

MANAGEMENT ACCOUNTING
● Role of management accountants is to give information, particularly financial
information to managers to come up with a decision. Pag may monetary image
kasi napipicture agad yung information. Mas importante yung how you express
recommendations sa managers; it is how you interpret and defend the
recommendations.

ACCOUNTINGS AS A TOOL FOR MANAGERS

● TOOL - accounting is a tool for managers to come up with a decision. When you
say accounting, more on financial aspect pero as part of the management team
kasi management accounting siya, ang gagawin ay yung information or report
yung ginagawa ni accounting ay gagamitin as a tool or weapon (basis) para
makapag bigay recommendation sa managers

MANAGERIAL ACCOUNTING
● It is the process that allows decision makers to set and evaluate business goals
by determining what information they need to make a particular decision and
how to analyze and communicate this information.
○ Managers are decision makers, they have their own goals and are
actually their target objectives. Dapat makuha nila yon. They make
decision to attain their goals.`
○ Role ng managerial accounting ay to supply information para sa best
decision ng organization to attain their goals and objectives.

MISSION STATEMENT
● One of the first agendas of the organization
● It is a short statement of a company’s purpose and focus. This should be broad
enough that it will encompass future growth and changes of the company.
○ Ito magiging direction ng company and will identify the purpose of the
organization. Will guide people in the management na sas lahat nga
actions and decisions ay towards their goals and objectives. Kailangan
naiintindihan to kasi when we do recommendations ay dapat in
accordance sa mission statement. Hindi pwede magrecommend nang
hindi bagay sa mission statement nila. It is a need to understand the
purpose or focus of the wants of the organization.
○ The point is, as a management accountant, you need to understand the
mission statement of the organization to make recommendations that
are aligned with the organization’s mission statement.

THREE RESPONSIBILITIES OF MANAGEMENT

● PLANNING
○ Occurs at all levels of an organization and cover various periods of time
 ■ Planning ay hindi lang naman sa top management and it occurs in
all levels of the organization
○ Operational Planning
■ Short-term plans; 1 year or less
■ These are day to day activities
■ Yung mga ginagawa or kailangan mong gawin day to day para
maattain yung goals, yun na yung operational plan
■ Doing these activities to achieve your long term goal sa strategic
plans mo; short term goals na under long term goals
■ What will you be doing para makaipon sa long term goals mo
○ Strategic Planning - involves setting priorities and determining how to
allocate corporate resources to help an organization accomplish both
short term and long term goals
■ 3 to 5 years (long term plans); setting priorities para efficient ang
resources
■ Pag gumagawa ng ganito, you are looking at the future
■ Resources are scarce kaya we have to use them wisely and by
doing strategic plans, you will be able to manage resources
effectively and efficiently
■ Pag namanage na to, susunod na yung operational planning
○ GOALS AND OBJECTIVES
■ You have to set your goals and objectives
■ A goal describes where you want to be in the future. An objective
does not explain how you plan to get there
■ The goal is what you want to achieve and the objectives ay yung
kung paano ka makakarating dun sa goal mo, eto yung mga
susundan mo kumbaga smaller goals, progresses ganon para
achieve ang goal
■ GUIDES
● SMART
○ Specific
■ State what you’ll do
■ Use action words
○ Measurable
■ Provide a way to evaluate
■ Use metrics or data targets
■ Kailangan may figures, pag may target kasi
measurable, you can quantify the objective
○ Achievable
■ Within your scope
■ Possible to accomplish, attainable
 ■ Dapat kaya at maassess ang organization
kasi baka hindi naman kaya ng
organization yung goals and objectives
○ Relevant
■ Makes sense within your jib function
■ Improves the business in some way
○ Time-bound
■ State when you’ll get it dine
■ Be specific on date or time frame
● CONTROLLING
○ Involves the monitoring of the planning objectives that were put into
place
○ Managerial accounting is a useful tool in the management control
function. Managerial accounting helps determine the appropriate
controls for measuring the success of a plan
○ Without controls, it is very unlikely a plan would be successful, and it
would be difficult to know if your plan was a success
○ Giving out recommendations and setting up controls on our plan
○ Example: to put safety in your inventory
■ The plan is to put CCTV cameras, add guards and use double locks.
These are your control measures pero paano mapprotektahan kung
hindi sinusunod yung control measures
● EVALUATING
○ Also called assessing or analyzing
○ Involves comparing actual results against expected results, and it can
occur at the product, department, division and company levels
○ When there are deviations from the stated objectives, managers must
decide what modifications are needed
○ Now looking for deviations kung yung mga plano na napagusapan at yung
nalagay na control measures ay sinusunod
○ This is where we check if things are being followed. Pag nakakakita ka ng
deviation (pagkakaiba kahit lugi ka o hindi), sa management accounting
kahit favorable or hindi, gastos pa rin yan, variance pa rin and the
management accountant should investigate bat nagkaroon ng deviations,
maganda man o hindi. Dapat kung ano pinlano at control measure, yun
ang mangyayari sa output.
● Sa lahat ng process na nabanggit, laging kasama ang management accountant

DIFFERENCE OF FINANCIAL ACCOUNTING AND MANAGEMENT ACCOUNTING

● Financial Accounting
○ The focus here is the preparation of our financial statements.
● Managerial Accounting
○ The focus is internal or improvements or recommendations sa managers.
 ● Financial Accounting - recording, financial statements, analysis of statements
○ We prepare for the use of external users
○ Pinakaoutput ay yung mga financial statements
● Managerial Accounting
○ Internal users - management
○ Ang mga output na ginagawa ay joc cost sheet, or any other information
needed. Hindi naka box or same format ang mga information sa
managerial accounting. Yung report mo ay yung kung ano gusto ng
management, kung ano gusto niyang report na makita kaya walang
standard report. Nasa pangangailangan ng manager yung output mo.

SKILLS REQUIRED OF MANAGERIAL ACCOUNTANTS

● Commercial Awareness – is knowing how a business is run and how it is
influenced by the external environment and knowing and understanding the
overall industry within which the business is operating.
○ Remember you are doing recommendations kaya dapat alam mo ang
process ng business
○ SWOT Analysis ginagamit dito - you are evaluating internal and external
environment and nakikita paano umiikot ang negosyo. Kailangan
magaling mag analyze ng environment
● Collaboration – involves working in cross functional teams and earning the trust
and respect of collegues in order to complete a task, is vital to improving
managerial accounting talents. The should be “TEAM PLAYER”
○ Should be a team player kasi dapat involved ka dapat sa all levels ng
organization. Involved ka kasi dapat alamin mo nga yung kung paano
nagrurun business. Pag di mo nakaibigan or di ka nakapagcollaborate
nang maayos, di nila ibibigay ang information needed para malaman mo
 yung kung pano nagrurun business at para sa mga reports na kailangan
mo gawin
○ Team player para makuha info at good report
● Effective Communication – Skills that allows them to convey accounting
information both written and oral forms in a way that the intended audience
can understand.
○ Conveying accounting information sa managements kaya dapat
maipaintindi mo sakanila kasi di lahat may background ng accounting.
When you do the report, you must be creative in conveying the
information. As much as possible, yung terms na gagamitin ay
naiintindihan at hindi technical para maintindihan nila.
● Technology Skills – These skills include not only accounting and reporting
software but also other programs that would assists in automating processes,
improving efficiencies and adding value to the company.
○ Includes other programs para maging efficient. Dapat din updated sa
mga software. Kailangan alam ioperate kahit basics kasi pano ka
magrerecommend kung di mo naiintindihan.
● Extensive Analytical Skills – They must regularly work with financial analysts
and management personnel to find ways to reduce expenses and analyze
budgets.
○ Comparing the actual and what is the plan. Bat may difference at hindi
nasunod yung plano? Variances, bat may variances. The accountant must
know and analyze bat may variance at paano macocorrect yung variance.
● Ethics and Values – They should be an example to others and encourage them to
follow internal control practices and procedures.
○ Set an example and encourage controls and practices. Walk the talk, kung
ano dapat sundan, yun ginagawa mo. Dapat din may extra level of value
ka kasi maraming tukso sa management accounting. Pagunfavorable,
dapat reflected

INSTITUTE OF MANAGEMENT ACCOUNTANTS

● The professional organization for management accountants, provides research,
education, a means of knowledge sharing, and practice development to its
members.
● The IMA also issues the Certified Management Accountant (CMA) certification to
those accountants who meet the educational requirements, pass the rigorous
two-part exam, and maintain continuing professional education requirements.
● The IMA also develops standards and principles to help management
accountants deal with ethical challenges.
● New Jersey - head office
● Nagbabantay ng matitigas na ulo na management accountant
 ● Kailangan you have all the background pag management accountant ka. You are
recommending kaya dapat may background ka, competent ka para tumama.
Kailangan may basis bat yun recommendation kaya need background knowledge.
● Hindi ka dapat nagpapadala sa bribery, dapat credible ka at nirereport ang lahat
● Sa confidentiality syempre kita mo information sa organization, as a respect din
and ethical standard, you always practice confidentiality sa work.

Sarbanes-Oxley Act of 2002 (SOX)

● In response to several corporate scandals, the United States Congress passed the
Sarbanes-Oxley Act of 2002 (SOX), also known as the “public company accounting
reform.”
○ Sa US, si Arthur Andessen na isang accountant, nagkaroon ng problem sa
organizatiom. Nag audit siya tapos nung nakita pagkakamali ay
pinagtakpan yung company. Hindi sinabi kung ano ang finding, hindi siya
transparent. Tapos nakita ng government and investigated the situation.
Nag file siya ng case and yung accountant, nag shred ng evidences para
pag may investigation, hindi makikita yung findings. Government
demanded the accountant at nakulong kaya nagka ganitong law.
○ Pinapareform ang companies na mag uphold ng ethics and standards kaya
madami rin requirements sa pagiging accountant. Sa Ph, corporate
governance ang tawag. Hindi pwede gumawa basta basta ng financial
statements kung hindi ka accredited
 ○ It is a federal law that was a far-reaching reform of business practices.
○ Its focus is primarily on public accounting firms that act as auditors of
publicly traded corporations.
○ The act intended to protect investors by enhancing the accuracy and
reliability of corporate financial statements and disclosures.
○ Thousands of corporations now must confirm that their accounting
processes comply with SOX.

Trends in Today’s Business Environment and Analyze their Impact on Accounting

● Business regulations are always being altered, global competition continues to
increase, and technology provides continual disruption. Management
accounting should keep up with the changes in the business.
○ Nag iiba playing field sa business
● Business entities have been in the lead for using technology, but they must
continue to adjust quickly with the ever-advancing business technology.
○ Kailangan di tayo nahuhuli sa technology
● ERP Systems help companies streamline their operations and help management
responds quickly to change.
○ ERP ginagamit na software sa malalaking organization. We must be able
to cope up with the changes
● Enterprise Resource Planning (ERP) helps companies streamline their operations
and helps management respond quickly to change. Although they are expensive,
these systems help alleviate the complications that arise from business systems
that do not coordinate with one another.
○ SAP system. Lahat integrated from HR sa sweldo, production, accounting
and marketing department, lahat nakaintegrate sa isang software kaya
nauupdate lahat kaso this is very costly
● Automation is a method of using systems, such as computers or robots, to
operate different processes and machinery to improve efficiencies and lower
direct labor costs. Companies use automation to remove the complex,
superfluous stages from a process in order to streamline the practice.
○ Ang advantage ay di mo na kailangan ng labor force, the machine will do
the process
● Outsourcing is hiring workers outside of the company who perform their tasks
inside or outside of the country.
○ Gustong gusto mag outsource ng mga foreigners kasi cheap ang labor
costs, gusto din ang Pilipino kasi magaling daw. Cheap in third world
countries.
● Lean Production
○ A lean business model is one in which a company strives to eliminate
waste in its products, services, and processes, while still fulfilling the
company’s mission.
○ Trying to improve in accordance with its mission, focus ay improvement
 ○ Sa lahat ng process, nag improve ka; continuous objective
● Balanced Scorecard
○ The balanced scorecard (BSC) approach uses both financial and
nonfinancial measures in evaluating all attributes of the organization’s
procedures.
○ Performance evaluation if lahat ay according sa mission statement
○ Kung may evidence ka na nagsasabi na tama ang plan, then effective ang
ginawa using BSC
● Globalization
○ Globalization is the development of business through international
influence or extending social and cultural aspects around the world.
○ Yung nakikita sa ibang bansa, naaapply sa PH
● Social Responsibility and Sustainability
○ With social responsibility and sustainability, companies make decisions
that “meet the needs of the present without compromising the needs of
future generations.”1
○ Companies ay conscious na sa environment and society kaya integrate
nila ang corporate social responsibility nila sa plans nila, mission, and
vision

Summary
● The purpose of managerial accounting is to supply financial and nonfinancial
information to the organization’s management and other internal decision
makers.
● Primary differences between managerial accounting and financial accounting
are: users, types of reports produced, frequency of producing the reports,
purpose of the information produced, focus of the reporting information, nature
of the original information used to produce the reports, and verification of the
data used to create the reports.
● Management accountants work with individuals at all levels of an organization
from the CEO to the shop floor workers. Skills for managerial accountants include
commercial awareness, collaboration, effective communication skills, strong
technology talents, extensive analytical abilities, and elevated ethical values.
● The Institute of Management Accountants (IMA), the professional organization
for management accountants, issues the Certified Management Accountant
(CMA) certification and has its own Statement of Ethical Professional Practice for
its members
● Changes in business trends such as technological trends, new business practices
such as lean practices, the use of evaluation tools such as balanced scorecards,
globalization, and the desire for businesses to practice social responsibility and
sustainability shape not only how businesses make decisions but how
managerial accounting has evolved and will continue to evolve to meet the
needs of organizations.
Explain how managerial accountants help managers plan, control, and evaluate.
● Solution
○ Answers will vary. Responses should include the following. Managerial
accountants help managers at all levels of the organization to plan,
control, and evaluate. They help determine whether plans are
measurable, what controls should be implemented to carry out a plan,
and what the proper means are for evaluating the controls. Feedback is
very important for each step, and the managerial accountants generate
the reports and information needed to assess the results of the various
evaluations, and they help interpret the results.