MANAGERIAL ACCOUNTING

Curriculum

Chapter 4
Chapter 1 Chapter 2 Chapter 3 Chapter 5 Chapter 6
Responsibility
The nature of Break-Even Relevant costs Accounting Financial Introduction to
managerial Analysis for decision statement budgeting
accounting making And transfer analysis
pricing
 CHAPTER ONE

The nature of Managerial

Accounting
LECTURE #1
1. What is managerial accounting?
2. Objectives of managerial accounting
3. Managerial accounting and cost accounting
4. Managerial accounting and financial accounting
 "Managerial accounting involves
the application of appropriate
techniques and concepts in
processing information to assist
WHAT IS management in establishing plans
and making rational decisions
towards the achievement of the
MANAGERIAL organization's objectives.“

(MANAGEMENT) “The activities carried out in a firm

ACCOUNTING?
to provide its managers and other
employees with financial and
related information to help them
make strategic, organizational, and
operational decisions”
OBJECTIVES OF MANAGERIAL
ACCOUNTING
a. Better decision making
b. Proper planning and formulation of policies.
c. Controls management performance
d. Interprets financial information
e. Motivates employees
f. Communicates up-to-date information
g. Evaluates policies effectiveness.
COST ACCOUNTING VS. MANAGERIAL ACCOUNTING:

Cost accounting is often associated with managerial accounting. Management

accountants need to understand cost and its concepts. Cost concepts are useful in many
areas of managerial accounting, such as in cost-benefit analysis, investing and financing
decisions, performance evaluation, and many others.

Despite the presence of overlapping topics, cost accounting and managerial accounting
are two different branches having different study focus.
COST ACCOUNTING

Cost accounting is defined as "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." (IMA)
Cost accounting focuses on the accumulation of costs incurred and allocating or
assigning such costs to products or departments.
MANAGERIAL ACCOUNTING

Managerial accounting (or management accounting) "involves partnering in

management decision-making, devising planning and performance management
systems, and providing expertise in financial reporting and control to assist
management in the formulation and implementation of an organization’s strategy."
(IMA)

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 within an organization.
Managerial accounting vs. Financial accounting:

Managerial accounting and financial accounting are two of the most prominent
branches of accounting.
They both deal with processing information which is useful in decision-making;
however, they have notable differences that distinguish them from each other.
Managerial accounting processes economic information to be used by
management in making decisions.
Financial accounting involves the preparation of general-purpose financial
statements used by various users in making informed decisions.
 THE DIFFERENCES BETWEEN
MANAGERIAL ACCOUNTING AND
FINANCIAL ACCOUNTING CAN BE
SUMMARIZED ACCORDING TO THE
FOLLOWING BASES OF COMPARISON
 Basis Financial Accounting Management Accounting
1. Users Internal and external Internal
General-purpose financial statements can The reports prepared in managerial
be used by external and internal users. However, accounting are strictly for use by internal users,
they are prepared primarily for external users, i.e. the management.
such as the investors, lenders and creditors, and
the government.

2. Compliance Required Not required

with accounting Financial accounting requires strict Management accounting is not required to
standards compliance with established accountingfollow accounting standards since the only users
standards. are the members of the management.

3. Time Historical Current and future

orientation Financial accounting processes historical Management accounting deals with current
information and summarizes them in theproblems of the company. Also, management
preparation of financial statements. accounting involves the preparation of budgets
and forecasts.
 Basis Financial Accounting Management Accounting
4. Emphasis Reliability, verifiability, objectivity of Relevance and timeliness, to provide the
financial information maximum aid in management decisions
5. Necessity Mandatory Optional
Financial accounting is required by law. Management accounting is not mandatory.
Companies are mandated to furnish financialHowever, a company that does not use it will
statements periodically. suffer great consequences.
6. Purpose of General-purpose Special-purpose
reports Financial statements provide general The financial reports in managerial
information, addressing the common needs of itsaccounting address a specific issue or concern.
users.
7. Details of Concise More detailed
reports Financial statements present data in a Financial reports carefully detail all
summarized and concise way. information that the management should consider
in making specific decisions.
8. Sources of Sources within the company, i.e. the Any source, both internal and external such
data accounting records of the company as interest rates, political environment, economic
and industry concerns, etc.