Management Accounting

‘’If you don’t Know

where you’ re going
,any path will take you
there ‘’
Definition of Managerial Accounting

- Is the process of identifying,

measuring, accumulating, analyzing,
preparing, interpreting, and
communicating information that help
managers fulfill organizational
objectives.
-
• -The information management
accountants gather and analyze is used
to support the actions of management.
• All business managers need accurate,
timely information to support pricing,
planning, operating and many other
types of decisions,
▪ Mangers of production, merchandising
government, and service oriented
enterprises all depend on management
accounting information
Differentiation between balance
sheet and budget :
• A balance sheet is a financial statement
that shows the financial position of the
business at a particular date,( the end
of the accounting period),
. The balance sheet presents a view of •
the business as the holder of resources
or assets they are equal to the sources
against , The sources consist of the
company’s liabilities and the owner’s
equity in the company.
Budget: •
A budget is quantitative expression of plan for
future. Often called a plan of action , and
called also profit of plan budget can be
made using financial data, non-financial
operating data, or a combination of both.
-The primary objective of a budget is to
forecast future financial and non- financial
transactions.
 Budgeting
1. The Operating Budget consists of:
• Sales budget
• Production budget
• Direct materials budget
• Direct labor budget
• Factory overhead budget
• Selling and administrative expense budget
• Pro forma income statement
2. The Financial Budget consists of:
• Cash budget
• Pro forma balance sheet
 Reasons for Budgets
• Planning:
The budget process provides a framework
To achieve the goals of organization without
the framework of a budget ,individual
mangers would be improvising decisions
without the direction and coordination
• Control by
1.Monitoring : budget set standards by which
mangers can monitor the organization ‘ s
progress in meeting its goals
2.Evaluation:
By comparing actual results with budget
• Communication and coordination
Different parts in organization must
communicate their plans &needs to each
other parts during the budget process
Each part of organization must coordinate its
activities to attain the budgeted goals
Budget is a planning tool •
,control tool, Motivation
tool and communication
tool
 Characteristic of successful
Budgeting
• Budget must be aligned with the corporate
strategy
• Budget must contain technically correct
&reasonably accurate numbers and fact
• Budget must be characterized as a
motivation tool to help employees work
toward organization objectives
• Budget must be as an internal control
device
• A higher authority than the team who
developed the budget must review and
approve the budget
• Investigation budget variances
• As noted at the beginning of the chapter,
significant deficient deviations from the budget
(i.e.., significant variances) may have three
causes: the budget may not have been well
conceived, conditions may have changed, or
manager’s job performance may have been
particularly good or bad.
• If the budget is not carefully developed with
reasonable estimates of cost, it should
• Finally, budget variances are sometimes due
to inefficiencies resulting from poor
management techniques or decisions. In this
case, top management may adjust the
compensation of the manager responsible
for meeting the budget (e.g., reduce or
eliminate his or her bonus compensation)
and suggest ways the manager can improve
the performance of his or her operation. In
some cases it may even be necessary to fire
a manager who is incapable of improving.
 • Controlling

• Accounting controlling Management controlling

1) To assure the until organization of 1) to assure the procedure
Apply the principles of accounting. Management applied.
2) To assure that the fixed assets ideal 2) to used the productivity
Not deceiving or steal. Usage.
 Summary
• Managerial Accounting, is the process of identifying, measuring,
accumulating, analyzing, preparing, interpreting, and communicating
information that help managers fulfill organizational objectives.
• A budget is a planning document created be anticipated
transactions occur.
• There are some principles of effective budgeting whish are;
• Long range goals principles, short range goals and strategic
principles, human responsibilities and interaction principles, budget
housekeeping principles, and budgets follow up principles.
• Budgets facilitate control by providing a standard for evaluation.
• The difference between controlling and follow up is that the follow
up is a step from controlling, and the controlling is function of
management.
 Exercise

• What is managerial accounting?

• Defined the budget? Explain the difference
between the budget and balance sheet.
• What are the Characteristic of successful
budgeting?
• What the difference between control and
follow up?
• What the difference between accounting
control and management control?