Graduate Business School

ZCMA6022 Managerial Accounting

MODUL 1.1 : UNDERSTANDING

MANAGEMENT ACCOUNTING

Management vs. Financial

Accounting
Accounting
Accounting System
System
(accumulates
(accumulates financial
financial and
and
managerial
managerial data)
data)
Management
Management Accounting
Accounting
Information
Information for
for decision
decision
making,
making, and
and control
control
of
of an
an organizations
organizations
operations.
operations.
Internal
Users

Financial
Financial Accounting
Accounting
Published
Published financial
financial
statements
statements and
and other
other
financial
financial reports.
reports.
External
Users
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Definition Of Management
Accounting
Chartered Institute of Management Accountants
(CIMA),UK.
Management Accounting is "the process of identification,
measurement, accumulation, analysis, preparation,
interpretation and communication of information used by
management to plan, evaluate and control within an
entity and to assure appropriate use of and accountability
for its resource (economics). Management accounting
also comprises the preparation of financial reports for
non-management groups such as shareholders, creditors,
regulatory agencies and tax authorities".

Definition Of Management
Accounting
Institute of Management Accounting (IMA,
USA)
"Management accounting is a profession
that 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

Comparison of Financial and

Management Accounting

Examples of MA Information
The reported expense of an operating
department, such as the assembly department
of an automobile plant or an electronics
company
The costs of producing a product
The cost of delivering a service
The cost of performing an activity or business
process such as creating a customer invoice
The costs of serving a customer

Role Of MA Information Within

Organization Decision Making
Planning
Product planning (revenue, costs), production planning (resource
availability and use by various products), strategy development
(organizations external environment)

Organization
Focusing on developing the organization systems that will develop,
produce and deliver organizations objectives such as product quality
and service levels to customers.
Information required include performance potential of different
production systems

Controlling
Focus on measuring and evaluating the performance of existing
organization systems and entities to identify how each is contributing to
achieve organizations objectives
Information required include system performance information such as
cost of producing products.
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Changes Focus of
Management Accounting
Non financial information
Financial information
(quantified in dollars
sign)
-Assets
-Liabilities
-Revenues
-Gross margin
-Operating expenses

Other
quantitative
information
-% of defects
-no. of customer
complaints
-warranty claims
- units in
inventory
- budgeted hours

Qualitative
information
- customer
satisfaction
-Employee
satisfaction
-Product or serve
quality
-Reputation

Integrate Both Financial And Non Financial

Information
E.g. Balanced Score Card
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Changes Focus of
Management Accounting
External Focus

Internal Focus
Efficiency &
effectiveness of
company & units

- related to strategy gain

competitive advantage . E.g.
value chain analysis,
strategic cost management
- information on customer
E.g. customer accounting,
customer profitability
- information on competitors
E.g. Benchmarking

Integrate both internal & external

focus

Code of Conduct for

Management Accountants
The Institute of Management Accountants (IMA)
Standards of Ethical Conduct for Practitioners
of Management Accounting and Financial
Management have two major parts,
which offer guidelines for:
Ethical behavior.
Resolution for an ethical conflict.

IMA Guidelines for Ethical Behavior

Recognize
Recognize and
and
communicate
communicate
professional
professional limitations
limitations
that
that preclude
preclude
responsible
responsible judgment.
judgment.
Follow
Maintain
Follow
Maintain
applicable
profession
applicable
Competence
profession
Competence
laws,
al
laws,
al
regulations
competenc
regulations
competenc
and
e.
and standards.
standards.
e.
Provide
Provide accurate,
accurate, clear,
clear,
concise,
concise, and
and timely
timely
decision
decision support
support
information.
information.

IMA Guidelines for Ethical Behavior

Do
Do not
not disclose
disclose
confidential
confidential information
information
unless
unless legally
legally obligated
obligated
to
to do
do so.
so.
Do
Do not
not use
use
confidential
confidential
information
information for
for
unethical
unethical or
or
illegal
illegal
advantage.
advantage.

Confidentiality
Confidentiality
Ensure
Ensure that
that
subordinates
subordinates do
do not
not
disclose
disclose confidential
confidential
information.
information.

IMA Guidelines for Ethical

Behavior

Refrain
Refrain from
from
conduct
conduct that
that
would
would
prejudice
prejudice
carrying
carrying out
out
duties
duties
ethically.
ethically.

Mitigate
Mitigate conflicts
conflicts of
of
interest
interest and
and advise
advise
others
others of
of potential
potential
conflicts.
conflicts.

Integrity
Integrity
Abstain
Abstain from
from activities
activities
that
that might
might discredit
discredit the
the
profession.
profession.

IMA Guidelines for Ethical Behavior

Communicate
Communicate
information
information fairly
fairly and
and
objectively.
objectively.

Credibility
Credibility
Disclose
Disclose all
all relevant
relevant
information
information that
that could
could
influence
influence aa users
users
understanding
understanding of
of
reports
reports
and
and

Disclose
Disclose delays
delays or
or
deficiencies
deficiencies in
in
information
information
timeliness,
timeliness,
processing,
processing, or
or internal
internal
controls.
controls.

IMA Guidelines for Resolution

of an Ethical Conflict
Follow employers established policies.
For unresolved ethical conflicts:
Discuss the conflict with immediate
supervisor or next highest uninvolved
manager.
If immediate supervisor is the CEO, consider
the board of directors or the audit
committee.
Contact with levels above the immediate
supervisor should only be initiated with the
supervisors knowledge, assuming the
supervisor is not involved.

IMA Guidelines for

Resolution
of an Ethical Conflict

Follow employers established

policies.

For unresolved ethical conflicts:

Except where legally prescribed, maintain
confidentiality.
Clarify issues in a confidential discussion
with an objective advisor.
Consult an attorney as to legal
obligations.

Why Have Ethical

Standards?
Ethical
Ethical standards
standards in
in business
business are
are essential
essential for
for aa
smooth
smooth functioning
functioning advanced
advanced market
market economy.
economy.

Without ethical standards in business, the

economy, and all of us who depend on it for
jobs, goods, and services, would suffer.

Abandoning ethical standards in business would

lead to a lower quality of life with less
desirable goods and services at higher prices.

Case Discussion
Cappucino Express
Instructions:
1. You will be given 15 minutes to read.
2. Discussions will be based on the
questions provided in the case.

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THE END

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