Introduction

Information
Accounting is used by
internal managers in their day-to-day
decision making and also by external
 users, such as investors, creditors,
donors, and even the Internal Revenue
Service.
Accounting Information Systems
– Contemporary View
Information
TRADITIONA
NONFINANCIA
L FINANCIAL
L Information
Accounting
• Liabilities • Percentage of
• Revenues Defects
• Gross Margin • • Customer Complaints •
Operating Warranty Claims •
Expenses Inventory Units
Financial Other Quantitative • Budgeted Hours
Information: • Assets Information: Qualitative
Information: Employee Quality
Satisfaction • Reputation
• Customer &
• Product & Service

Integration of Quantitative and

Qualitative Data

ERP systems aid in the integration of

both quantitative and qualitative
data, so that data become useful
information, and this information can
be transformed into knowledge that
allows effective communication
throughout an organization.
 A Comparison of Financial
and Managerial Accounting
• is the area of
Financial accounting
accounting concerned primarily with the
preparation of general-use financial
statements for external users.
Managerial accounting
• is concerned primarily with generating
financial and nonfinancial information for
use by managers in their decision-making
roles within a company.
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Financial Accounting
• Concerned with bookkeeping, i.e. maintenance of records
of costs, debtors, and creditors, etc.
• As per the company law requirements, the company has to
maintain the accounts for their adoption by the
shareholders in the Annual General Meeting.

Limitations of Financial Accounting

• Doesn’t aims at continuous reporting of financial data,
which the management accounting does.
• Not reveal the data by jobs, process, products,
etc. • Provides only historical data.
• It does not provide data for adequate control over materials,
labour, and overheads.
• No systems to set predetermined estimates, standards, or
budgets.

Users of Financial
Information
Types of Information Needed By
External Users
 • Information about current and future
Stockholders & Investors prospectuses

• Information about
company’s financial health
and ability to repay loans. •
Creditors
Examples: cash flow
profitability of a company
statements, financial ratios
• Examples: annual reports,
registration statements,
Types of Information Needed By
External Users
 • Specific information needs such as
• Examples: income tax
Government Agencies
returns and payroll reports

• Detailed information
that’s more flexible than
Suppliers financial information and
and similar to internal user
Customers needs.
income measurement, • Examples: bank balances
payroll, and taxable assets and inventory levels
Types of Information Needed By
Internal Users
• Internal users, particularly management, need
more flexible and detailed information that will
allow them to perform:

Planning

Operating (Decision Making)

Controlling
Planning

Identify
alternatives.
 Select alternative that does
the best job of furthering
organization’s objectives.

Develop budgets to guide

progress toward the
selected alternative.
Short –Term Planning Activities
Known as
Operational
Planning
includes:
Time
 Cash Needs
Needs Sales
quotas
budgets
Customer
Current Service

Long–Term Planning Activities

Known as
Strategic
Planning
includes:
Plant
 Share Sales
Growth
Locations
New
Equipment
Market Investment

Operating Activities (Decision Making)

Advertise? Should We
Should We Make or Buy
Accept Parts?
Special
Orders?
????
Daily
What
Business Price
Decisions Should Be
Charged?
Should We ????
 Controlling Activities
Involves motivation, monitoring, and
evaluation of employees to attain
company goals.

Achieved Examples
Goals

include:

☺
• Incentives
• Performance
Measures
• Product Quality
Planning and Control

Cycle
Functional Areas of Management
 Managers are
found in all
Finance organization.

Marketing
Operations
Human
functional areas of an
Resources Production
and
The Role of Management Accountants
 Management accountants
have become decision-support
specialists who see their role as
interpreting information, putting it
into a useful format for other
managers, and facilitating
management decision making.
The Role of Management Accountants
MANAGERIAL ACCOUNTING helps managers perform three
vital activities
 1. Planning - the process of establishing goals and
specifying how to achieve them.
2. Controlling- the process of gathering feedback to ensure
that a plan is being properly executed or modified as
circumstances change.
3. Decision making- selecting a course of action from
competing alternatives
The Role/Functions of Management Accountants
The primary responsibilities of a management accountant vary, but mostly
include:
• Preparing monthly management accounts and other financial reports such
as budgets.
• Controlling income and expenditure within the business and ensuring that
expenditure is inline with budgets.
• Presenting reports to senior management to aid with business decision
making.
• Compiling strategies that will reduce business costs.
• Obtaining finance for projects.
• Advising on the financial implications of business decisions. • Developing
and overseeing financial systems and procedures and identifying
opportunities to improve these.
• Overseeing accounting technicians and support with generic accountancy
tasks.
• Communicating with all levels within the organisation and being able to
present financial information to non - finance members of staff. • Analysing
and managing risk within the business.
Different Informational Needs
of Users

Due to the varying needs of

internal users, managerial
 accounting is more
FLEXIBLE
than financial accounting.
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