ReSA THE ROVIEW SCHOOL OF ACCOUNTANCY* MANAGElNENTSERVICES(A.

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PAS.A: MANAGEMENT ACCOUNTING
MANAGEMENT - the process of planning, organizing, and controlling a certain task to realize the objectives of
the organization.

BASIC FUNCTIONS OF MANAGEMENT

r PLANNING
PlanalnqInvol lees;
setting' up immediate and long-term goals.
 deciding which alternative means would be best suited to attain the set goals.

p:Joni:6aq nvsklyge:
ORGANIZING  deciding how to utilize available resources a .plans are being carried out.
 tackling activities such as staffing, subord` ating, directing, motivating, etc .

Conttrgling involves:
CONTROLLING) - comparing actual performance with set plans or standards.
- deciding what corrective actions to .take.should there be any deviation (variance)
between actual and planned performance.

NOTE: decision-making is an inherent function of manegement; all management functions would require a
certain amount of decision-making.

MANAGEMENT BY OBJECTIVES vs. MANAGEMENT BY EXCEPTION

Management by Objectives is a procedure In which a subordinate and a supervisor agree on goa t s
a n d t h e m e t h o d s o f a c h i e v i n g t h em a n d d ev el o p a pl a n i n a c c o r da n c e w i t h t h a t
agreement. The subordinate is then evaluated with reference to the agreed plan at the
end of the period.

Management by Exception is a technique of highlighting those which vary significantly from plans and
standards in line with the management principle that executive time should he spent on
items that are non-routine and are identified as top priority.

MANAGEMENT ACCOUNTING - an application of appropriate techniques and concepts in processing historical

and projected economic data of an entity to assist management in establishing plan to
. meet economic objectives and in making rational decisions with a view toward achieving
the objectives. (American Association of Accountants)

MANAGEMENT ACCOUNTING vs. FINANCIAL ACCOUNTING

Y.
FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING
1. User of 'information Primarily for external users Exclusively for internal users (management)

2. G u idin g pri nc i pl e s Generally Accepted Accounting Principle Management wants and needs

3. Optional/Mandatory Mandatory (especially for public entities) Discretionary or optional

4. Type of information Primarily monetary (financial) in nature Monetary and non-monetary

5. Emphasis of reports Reliability (precision of data) Relevance (timeliness of data)

6. Purpos e/End r esult Financial reporting and compliance Decision-making

7. S o u r c e o f d a t a From company's (internal) info system From internaF and external sources

8. A mo unt of det a i l Compressed and simplified Extensive and detailed

9. Focus of inform ation Foc us m ainly on busin ess as a whole Focus on segments and business as a whole

10.F r e q u e n c y Periodic (annually, quarterly) As frequent as need arises

11.T i m e o r i e n t a t i o n Mainly historical (past) data Future-oriented using current and past data

12.U n if y in g mo de l Assets Liabilities + Equity No unifying model or equation

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 SA-The Review School of Accountancy MS-A
MS: MANAGEMENT ACCOUNTING

THE CONTROLLER: CHIEF MANAGEMENT ACCOUNTANT

C O NTR OL L ERSH I P - th e pr ac t ic e of th e e s ta bl i shed sci enc e o f con tro l, wh ic h i s t h e pro c ess by wh ich
management assures itself that company resources are obtained and utilized according
to plans that are in tine with the company's set objectives.

CONTROLLER - an officer of an organization who has responsibility for the accounting aspect of management
control. It is a title given to a person hording the position of a chief management accounting
executive of a business enterprise. In many accounting texts and business literature, the
controller is often referred to as the 'chief accountant.'

CONTROLLER

FINANCIAL
ACCOUNTING
COST & MANAGEMENT
ACCOUNTING
ACCOUNTING
SYSTEMS & PROCEDURES
FINANCIAL ANALYSIS &
SPECIAL STUDIES
GOVERNMENT & TAX
REPORTING

LINE FUNCTION vs. STAFF FUNCTION

Line function - the authority to give command or orders to subordinates. It exercises direct downward
authority over line departments (e.g., VP for operations over operations manager).

Staff function - the authority to advise but not to command others; the function or responsibility of
providing line and staff managers with specialized service and technical advice for
support. It is exercised laterally or upward.

The controller primarily exercises a staff function as the controller's office gives advice and service to
other departments and to entire organization as a whole; however, in the accounting department that is
usually headed by the controller, the controller has a line authority over subordinates.

CONTROLLER vs. TREASURER

To avoid incompatible duties being assigned to a single of ficer, a controller, who is primarily concerned with
accounting, must not hold at the same time the position of a treasurer, who is primarily concerned with
custody of funds. Consider the following:
CONTROLLER --t.10,01r3i)i,
- TREASURER
1 Planning and control
. 1. Provision of capital
Reporting and interpreting 2. I n v e s t o r r e l a t io n s
Evaluating and consulting 3 . Short-term financing (61.'6 Ick't•CO.t. '1"1
4
r Nvip.w.c..0 4. 4 . B a n ki n g a n d cu sto dy
Tax administration
1/4. Government reporting
111(1 0 5, Credit and collection s
6. Investments
1. Protection of assets
7, Insurance
6, Economic appraisal
7.
STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS
According to the Standards of Ethical Conduct set by the Institute of Management
Accountants (1MA), management accountants have a responsibility to...

COMPETENCE

CONFIDENTIALITY
r.
INTEGRITY
development of their knowled_g! and skills
.., refrain from disclosing con fi dential information acquired in the course of their OBJECTIVITY
... maintain an appropriate level of professional competence by ongoing
2 work except when authorized and/or unless to elf obligated to do so 3
—
...
refrain from engaging in any activity that would prejudice their ability to

____ c a tr o l i t Their duties ethically_ ___

4 ._ communicate information fairly and objectively and disclose fully all relevant
information relative to users' need.
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 RSA - The Review School of Accountancy MS-A
MS: MANAGEMENT ACCOUNTING

MULTIPLE-CHOICE QUESTIONS
(Sources: CNINCIARPCPAIAICPA/Various test banks)
1. The discipline of accounting concerned with providing information to management in making decisions
about business operations.
a. Cost accounting
b. Financial accounting
c. Government accounting
d. Management accounting
2. The primary purpose of management accounting is to provide information
a. To external users
b. To internal users
c. To both internal and exter nal users
d. To management and government
3. Which of these information characteristics is deemed most important to management accounting?
a. Verifiability and accuracy
b, Comparability and full disclosure
c. Relevance, flexibility and timeliness
d. Conservatism and substance over form
4. Managerial accounting
a. Is governed by Generally Accepted Accounting Principles (GAAP).
b. Is concerned only with monetary information.
c. Is discretionary rather than mandatory.
d. Is focused on business as a whole rather than on segments of the business.
5, Managerial accounting is similar to financial accounting in that
a. Both are governed by Generally Accepted Accounting Principles.
b, Both classify reported information in the same way.
c. Both concentrate with historical costs.
d. Both deal with economic events.
6. Which of the following statements is false?
• a. Management accounting is synonymous to managerial accounting.
b. Management accounting has no externally imposed standards while financial accounting
has to follow the Generally Accepted Accounting Principles.
c. Financial accounting deals with information that is primarily reported to individuals
outside the organization.
d. Cost accounting reports refer to accounting for the annual cost of operating a business.
7. Which of the following statements is true?
a, Financial accounting is a subset of cost accounting.
5. Management accounting is a subset of cost accounting.
c. Cost accounting is a subset of both management and financial accounting.
d. Management accounting is a subset of both cost and financial accounting.

Cost accounting system is usually utilized for

a. Internal and external reporting that may be used in making nonro tine decisions and in
►

developing plans and policies

b. External reporting to government, various outside parties, and shareholders
c. Internal reporting for use in management planning and control, and external reporting to
the extent its product-costing function satisfies external reporting requirements
d. Internal reporting for use in planning and controlling routine operations
a., -it
kat 9. The basic management process does not include
a. Rationalizing
, b.
c. Controlling
Subordinating
aiapaik:a3
d. P l a n n i n g
C 10. The function of management that compares planned results against actual results is known as
a. Planning
b . Directing and motivating
c . Controlling
d . Decision making

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ReSA - The Review School of Accountancy MS-A
MS: MANAGEMENT ACCOUNTING

11. The management control process contains the following four sequential steps, including
A ) I m pl e m e n t i n g a pr o gr a m o f c o r r ec t i v e a c t i o n ,
B ) C o m pa r i n g a c t u a l p e r f o r m a n c e w i t h st a n da r d s.
C ) E s t a b l i s h i n g s t a n d a r d s o f p er f o r m a n c e.
D) Measuring actual performance.

The proper sequence of these activities is:

a. Cr D, A, B
b . D, C, B, A
C. D, B, C, A
d. C, D, B, A

12. A practice in which a subordinate and a supervisor agree on goals and the methods of achieving them.
a. Management by objective.;
b. Management by subjective
c. Management by exception
d. Management by example

13. The controller primarily

a. Occupies a staff position
b. Occupies a line position
C. Occupies a non -managerial rank -and-file position
d. Has little influence in the decision -making process

14, Which is a characteristic of a line function rather than a staff function?

a, It is a function that gives support, advice and service to line managers.
b. It is the authority to command action or give orders to subordinates.
c. It is exercised laterally or upward.
d. It is a support function by provision of services to a co -department.

15. Which of the followino statements is true?

a. The controller, as the title implies, exercises direct control over business operations.
b, The controller performs primarily a line function.
c. T h e t r e a s u r e r pe r f o r m s p r i m a r i l y a l i n e f u n c t i o n .
d . The primary functions of a controller are the basically the same as those of a treasurer.

16. management accounting is used by an organization's management for a multitude of purposes that do
not include
a. Marketing
b. Control
c. Evaluation
d. Reporting

17. Controllers are ordinarily not concerned with

a. Preparation of tax returns
b. Reporting to government
c . Protection of assets
d. Investor relations

18. The treasury function is usually not concerned with:

a. Financial reporting
b. S hor t -t e rm fi na nc in g
C . a s h c u s t o d y a n d ba n k i n g
d. Credit extension and collection of bad debts

19, The professional certification most relevant for managerial accountants is the
a. CPA
b. CMA
c, CIA
d. CFA

20. Which item is not an IMA Standard of Ethical Conduct for Management Accountants?
a. Competence
h. Integrity
c. L o y a l t y
d. O b j e c t i v i t y

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