STRACOSMAN: STRATEGIC COST MANAGEMENT

CHAPTER 1: Objectives, Role, and Scope of Management Accounting

SUMMARY NOTES BY: Mary Joy C. Nala, CB
BS ACCOUNTANCY 3B | 2nd SEMESTER A.Y. 2022-2023

What is management? Management Advisory Services (MAS) vs. Financial

Main aspect Accounting and Reporting (FAR)
The process of planning, organizing, and controlling Management Financial
Accounting Accounting
tasks to realize the objectives of an organization. User of Information Management External users
Applicable Standards Best Practice PFRS/ GAAP
Planning Organizing Controlling Information being Quantitative and
Quantitative
processed Qualitative
Emphasized quality of Relevance
Setting the objectives Staffing, Directing and Motivating Actual Vs. Standard Reliability
Information
Purpose Decision Making Financial Reporting
Detail of Information Extensive Summarized
Management Accounting Specific Segments Business as a
Scope of Information
- Application of appropriate techniques and Whole
concepts in processing the historical and projected Frequency As the need arises Periodically needed
Magnitude of Highly used
economic data of entity to assist management in Estimates
Moderately used
establishing a plan for reasonable economic Accounting System Accounting System
Information Source
objectives and in the making of a rational decision. and Others (Bookkeeping)
Reports Recommendation Financial Reports

Management Advisory Services

- Providing advice and technical assistance to help CIMA Code of Ethics
clients improve the use of their resources to The CIMA code of ethics is based on the IFAC handbook
achieve their goals. of the code of ethics for professional accountants, from the
International Ethics Standards Board of Accountants
Basic Management Function (IESBA).
Planning Setting of goals IESBA Principles
Controlling Evaluation Actual vs. Planned Goals Integrity
Determination of Predictive Information for business
Decision Making
decisions Objectivity
Confidentiality
Planning: Planning process may be short term or long term. Management is Professional Behavior
extremely concerned with planning process, as effective planning leads a
business to reap desired results. By means of planning, a business Professional Competence
management can identify where it stands and what it takes to grow and develop and Due Care
in a way as has been predetermined.

Controlling: As regards controlling, so far as the budgets are useful in Integrity: being straightforward, honest and truthful in all
facilitating the planning process of a business, budgetary control is a good professional and business relationships. You should not be
means of controlling as well. Other techniques, such as, standard costing and associated with any information that you believe contains a
departmental operating statements are of great help in making controlling
measures. They are also helpful to take remedial measures in case of materially false or misleading statement, or which is
deviations in the performance of business entity. misleading by omission.
Decision-Making: It is through this process that the results are
communicated to the owners, superiors and subordinates. It includes Objectivity: not allowing bias, conflict of interest or the
transmitting data highlighting necessary information, such as, progress influence of other people to override your professional
of business, financial position - to the required users. This enables judgement.
managers to highlight the issues that are worth and that they need
proper analysis, so that the intended results may be attained. Confidentiality: you should not disclose professional
information unless you have specific permission or a legal
Management Accounting: Key Aspects or professional duty to do so.
Application of techniques and
Information Processing approaches to process historical and
projected financial data Professional Behavior: comply with relevant laws and
Internal users include the management
Assists Internal Users and those charged with governance regulations. You must also avoid any action that could
(aka Board of Directors) negatively affect the reputation of the profession.
Should be consistent with the economic
Economic Decisions
objectives set by the management
Rendered by a professional qualified by Professional competence and due care: an ongoing
Consultancy Services education and technical ability
regarding a subject matter commitment to your level of professional knowledge and
Formulate an advice to the client skill. Base this on current developments in practice,
Technical Assistance independently and
ethically legislation and techniques. Those working under your
Resource Utilization
Efficient use of resources with a view of authority must also have the appropriate training and
achieving overall objectives
supervision.
SUMMARY NOTES
Prof. Rica M. Quitoriano BSA 3B
 STRACOSMAN: STRATEGIC COST MANAGEMENT
CHAPTER 1: Objectives, Role, and Scope of Management Accounting
SUMMARY NOTES BY: Mary Joy C. Nala, CB
BS ACCOUNTANCY 3B | 2nd SEMESTER A.Y. 2022-2023

Roles and Activities of Controller and Treasurer objective of ascertaining, reducing and controlling costs. (Cost
accounting subject starts from graduation level)
• Controllership Function is the established Management accounting is the most recently developed branch of
science of control which promotes the efficient use accounting. It is concerned with generating accounting information
of an entity’s resources in accordance with its relating to funds, costs, profits, etc., as it enables the management in
planned objectives. decision making. We may say that management accounting addresses
• Traditional management and it focuses on the the needs of a single user group, i.e., management.
areas of planning and controlling
• Deals with records, systems and processes to
attain the objectives of internal controls and The accounting system is part of the organization’s management
therefore, good managing. information system (MIS).
• Treasury Function, on the other hand, involves The cost accounting system, which accumulates data about the
the management of money and financial risk in a costs of producing goods and services, is part of the organization’s
business. overall accounting system. It accumulates cost information for both
• Deals with money, cash or wealth of an management accounting and financial accounting.
organization.
MANAGEMENT FINANCIAL
Controllership Functions Treasury Functions ACCOUNTING ACCOUNTING
1. Capital Financing/Provision for External users:
1. Planning and Control Internal users: officers stockholders, creditors,
Capital USERS OF REPORT
and managers concerned government
2. Reporting 2. Investor Relations agencies.
3. Evaluation 3. Short-Term Borrowings To provide internal
4. Banking Relations and users with information
4. Government Relations that may be used by To provide external users
Custodians
5. Protection of Assets 5. Credit and Collection managers in carrying with information about the
PURPOSE out the functions of organization’s financial
6. Economic Appraisal 6. Investments planning, controlling, position and results of
7. Tax Planning and 7. Insurance decision-making, and operations.
Administration performance
evaluation.
Different types of
Distinction among Management Accounting, Cost reports, such as
Accounting and Financial Accounting budgets, financial Primarily financial
projections, cost statements and the
TYPES OF REPORTS
analyses, etc., accompanying notes to
Financial Cost Management depending on the such statements.
Basis specific needs of
Accounting Accounting Accounting
Record management.
Ascertainment, To assist the Reports are based on
transaction and Reports are based almost
allocation, management in a combination of
determine BASIS OF REPORTS exclusively on historical
Objective accumulation decision-making historical, estimated,
data.
financial position and projected data.
and accounting and policy
and profit or Reports are prepared in
for cost formulation In preparing reports,
loss. accordance with generally
the management of a
Concerned with Deals with STANDARDS OF company can set rules
accepted accounting
both past and projection of principles and other
Concerned with PRESENTATION to produce information
Nature present recorded data for the pronouncements of
historical data most relevant to its
(historical in future (futuristic authoritative accounting
specific needs.
bodies.
nature) nature)
Focus of reports is on
Certain principles the company’s value
Principle Governed by No set principles
followed for chain, such as a Financial reports relate to
Followed GAAP are followed in it REPORTING ENTITY
recording costs business segment, the business as a whole.
Uses both product-line, supplier,
Data Qualitative Only quantitative or customer.
quantitative and
Data Used Aspects are not aspect used Reports may cover
qualitative
recorded recorded any time period – year,
concepts
quarter, month, week, Reports usually cover a
PERIOD COVERED
day, etc. Reports may year, quarter, or month.
Financial Accounting is that branch of accounting which records be required as
financial transactions and events, summarizes and interprets them frequently as needed.
before communicating the results to the users. It determines profit
earned or loss incurred during an accounting period and the financial
position as on the date when accounting period ends. The end product
of financial accounting I the profit & loss account for the period ended
and the Balance Sheet as on the last day of accounting period.

Cost Accounting is a branch of accounting is concerned with

ascertaining cost of products, operations, processes or activities. It is
that branch of accounting which deals with recording costs with the

SUMMARY NOTES
Prof. Rica M. Quitoriano BSA 3B