MANAGERIAL

ACCOUNTING
Mon Raval Sevilla, CPA
 Introduction to managerial accounting
Types of costing method pt1
 ABC
 Joint
 Job-order

COURSE Types of costing method pt2

OUTLINE  Process

Types of costing method pt3

 Absorption and variable
 CVP
 Margin of safety
 Variance analysis
 Materials
 Labor
 Fixed and variable overhead

COURSE Materials management

OUTLINE  EOQ
 Safety stocks
 Reorder point
 Order and carrying cost
 Microeconomics
 Demand and supply
 CPI
 Elasticity
 Types of market
COURSE
OUTLINE Working capital management
 Residual income
 Discounted,nondiscounted cash flow
 NPV
 Microeconomics
 Demand and supply
 CPI
 Elasticity
 Types of market

COURSE Working capital management

 Residual income
OUTLINE  Discounted,nondiscounted cash flow
 NPV

Relevant costing
 Make or buy
 Accept or reject
  Managerial accounting is the branch of accounting that deals

INTRODUCTI with providing accounting information that is useful to

managers in decision-making.
ON TO  Unlike financial accounting, it does not focus on following
MNGT reporting standards.

ACCNTG  Rather, it makes use of principles from different fields of

business to cater to management needs.
INTRODUCTI
 Managerial accounting involves budgeting and forecasting,
ON TO performance evaluation, financial analysis, product costing and
MNGT pricing, evaluation of business decisions, governance, corporate
finance, and other areas.
ACCNTG
  Managerial accounting, or management accounting, is the
WHAT IS branch of accounting that focuses on providing information for
use by internal users.
MANAGEMENT  Internal users pertain to those working within the company,
ACCOUNTING specifically the management.
  As defined by the American Accounting Association,

WHAT IS  "Managerial accounting involves the application of appropriate

techniques and concepts in processing information to assist
MANAGEMENT management in establishing plans and making rational
ACCOUNTING decisions towards the achievement of the organization's
objectives."
  There are two broad functions in an organization: line and staff.
Line function is the one that is directly involved in the core
operations of the company such as sales and production. Staff
LINE AND function, on the other hand, provides advisory and support to
the organization.
STAFF  Generally, management accountants exercise staff functions.
FUNCTION  They support the company by providing information to enable
decisions which are vital for the company's performance and
continuity.
LINE AND  The Chief Management Accountant (or controller) exercises

STAFF line function over his or her subordinates, and performs staff
functions to the other members of the management.
FUNCTION
  Top management - The top management or administrative
level consists of the Chief Executive Officer (CEO) and the
board of directors (BOD).
 The CEO is also called the managing director or president, and
THE is selected by the board of directors from among themselves.

MANAGEME  The BOD is selected by the shareholders to represent them in

managing the company.
NT  The top level management is in-charge with the overall
direction of the company. They set company goals, policies and
long-term plans.
  Middle management - Also known as executory management,
the middle-level management consists of departmental heads
and branch managers.
 They implement and execute the plans and policies set by the
THE top managements.
MANAGEME  The middle management is the intermediary between the top
NT and low level management. They report to the top management
as well as communicate the plans of the top level to the lower
levels.
  Low level management - The low level management or front-
line management is responsible in directing and controlling the
day-to-day operations of the company.
THE  They report directly to the middle management.
MANAGEME  The lower level management consists of supervisors, foremen,
NT and officers who are in-charge of directing workers and
employees.
  Chief Management Accountant (Controller)
 The Chief Management Accountant or Controller, sometimes
"Comptroller" especially in government agencies, is mainly
CHIEF responsible for the accounting aspects of management planning
MANAGEMENT and control.

ACCOUNTANT  The controllership department carries out the following

functions:
  Planning and control - such as making budgets and determining expectations
regarding future outcomes of alternative courses of action
 Internal reporting and interpreting - accumulating and summarizing financial
data and disclosing its implications to different levels of management
 Evaluation and consulting - assessing different alternatives giving advice to
the management to come up with appropriate decisions
 Tax administration - supervising the formulation and implementation of tax
CHIEF policies and procedures of the organization and evaluating implications of tax-
related decisions
MANAGEMENT  External reporting - preparation of financial statements in accordance with
ACCOUNTANT appropriate accounting standards to meet the information needs of external
users, especially the government
 Protection of assets - implementing internal controls, insurance and performing
internal audits to protect the company from losing its assets because fraud, theft,
natural disasters, etc.
 Economic appraisal - assessing the value the economic and social and
government influences, and interpret their effects or impact on the business
  Managerial accounting processes economic information to aid
the management in making decisions.

CHIEF  It is not mandatory yet very important.

MANAGEMENT  Without managerial accounting, a business would suffer in
ACCOUNTANT information deficiency leading to uninformed decisions that are
detrimental to the entity's performance and even to its
existence.
  Managerial accounting and financial accounting are two of the
most prominent branches of accounting.
FINANCIAL VS  They both deal with processing information which is useful in
MANAGERIAL decision-making; however, they have notable differences that
ACCOUNTING 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-
FINANCIAL VS purpose financial statements used by various users in making
informed decisions.
MANAGERIAL
 The differences between managerial accounting and financial
ACCOUNTING 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 The reports prepared in managerial
can be used by external and internal accounting are strictly for use by
users. However, they are prepared internal users, i.e. the management.
pimarily for external users, such as
the investors, lenders and creditors,
and the government.

FINANCIAL VS
MANAGERIAL
ACCOUNTING
2. Compliance Required Not required
with Financial accounting requires strict Management accounting is not
accounting compliance with established required to follow accounting
standards accounting standards. standards since the only users are the
members of the management.
 3. Time orientation Historical Current and future
Financial accounting processes Management accounting deals
historical information and with current problems of the
summarizes them in the company. Also, management
preparation of financial accounting involves the
statements. preparation of budgets and
forecasts.

FINANCIAL VS
MANAGERIAL
4. Emphasis Reliability, verifiability, Relevance and timeliness, to
objectivity of financial provide the maximum aid in
information management decisions
ACCOUNTING
5. Necessity Mandatory Optional
Financial accounting is required Management accounting is not
by law. Companies are mandated mandatory. However, a company
to furnish financial statements that does not use it will suffer
periodically. great consequences.
 6. Purpose of reports General-purpose Special-purpose
Financial statements provide general The financial reports in managerial
information, addressing the common accounting address a specific issue or
needs of its users. concern.

7. Details of reports Concise More detailed

Financial statements present data in an Financial reports carefully detail all
summarized and concise way. information that the management
should consider in making specific
decisions.

FINANCIAL VS
MANAGERIAL
ACCOUNTING
8. Sources of data Sources within the company, i.e. the Any source, both internal and external
accounting records of the company such as interest rates, political
environment, economic and industry
concerns, etc.

9. Frequency of reports Financial statements are usually Financial reports in management

furnished monthly, quarterly, annually. accounting are prepared as the need
arises.
  Cost accounting is often associated with managerial
accounting.
 Management accountants need to understand cost and its
concepts.
COST VS  Cost concepts are useful in many areas of managerial
MANAGERIAL accounting, such as in cost-benefit analysis, investing and
ACCOUNTING 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.
COST VS  It includes methods for recognizing, classifying, allocating,
MANAGERIAL aggregating and reporting such costs and comparing them with

ACCOUNTING standard costs."

 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
COST VS in financial reporting and control to assist management in the
formulation and implementation of an organization’s strategy."
MANAGERIAL  It is the process of identification, measurement, accumulation,
ACCOUNTING analysis, preparation, interpretation, and communication of
financial information, which is used by management to plan,
evaluate, and control within an organization.
 Difference between Cost Accounting and Managerial
Accounting
 Based from the definitions given above, the difference between
the two lies in their functions. The main function of cost
accounting is cost accumulation and allocation to determine
cost values. Managerial accounting, on the other hand, provides
COST VS information (including cost information) to the members of the
MANAGERIAL management for decision-making purposes.

ACCOUNTING  Financial accounting, another distinct branch of accounting,

also utilizes cost accounting concepts. Cost accounting
provides the needed values to be reported in the financial
statements, especially in the computation and presentation
of cost of sales.
 Now you understand the basics of management accounting. In the
internet, study activity based costing, joint costing, job order
costing and process costing. 4 groups.

Then write the following in word format:

ACTIVITY 1. Definition of the costing methodology

2. Important terms to remember
3. Process of computation