SESSION 4

Managerial Accounting in the

Information Age
By: Andelyn C. Rustria
Professor: Dr. Melchor Julianes

CM
A
 Presentation Outline
I. Goal of Managerial Accounting
II. Comparison of Managerial and Financial
Accounting
I. Goal of Managerial Accounting
The goal of managerial accounting is to
provide information that managers need
for:
A. Planning
B. Control
C. Decision Making
 A. Planning

Plans communicate goals to

employees to coordinate functions Plan
such as sales and production.
Financial plans are often expressed
in the form of budgets (i.e., profit, Action taken to
cash, production budgets) Implement plan
 Plan

B. Control Action taken to

Implement plan

Performance reports compare Results

actual with planned (budgeted)
performance. Management by
Comparison of
exception is used meaning that
planned and actual
only significant deviations are
results
investigated
Evaluation
 C. Decision Making
Plan

Decisions to Action taken to

change operations Implement plan
or revise plans
Results

Decisions to Comparison of
reward or punish planned and actual
managers results

Evaluation

The distinction between evaluating managers and evaluating the

operations they control is important. For example, an evaluation of
an operation can be negative even when the manager evaluation is
positive.
 Main functions of the Controller
Planning
Controlling
Reporting
Accounting
Many others, esp. in smaller companies
 Planning function
Controller must act as the coordinator who
assembles and maintains the plan
Must verify that:
Sales plan or forecast supports corp. policies &
objectives
Assumptions are valid & realistic
Production plan supports the sales schedule
Plan is within facility capabilities
Expenses are in proportion to other activities
Sufficient funding exists
 Control function
Controller provides information to each
manager
Consumes a lot of the staff time
Role does not end with feedback
Flowchart existing systems
Implement process changes
Must remain forward-looking
Cant control the past
 Reporting function
Function closely related to Planning & Control
Essential to make them effective
Not just routine tabulation & presentation!
Encompasses the interpretation of data
Management must actually understand
Reports to outside parties:
Shareholders, general public, creditors, customers,
SEC, IRS.
 Accounting function
Traditionally the principal function
Newer aspects of the job:
Benchmarking key practices
Converting to electronic transactions
Reducing cycle time (of accounting activities)
Outsourcing accounting functions
Reengineering key functions
 Todays Operating Environment
Greater public expectations for seamless, quality and value-for-
money services.
Focus on results and financial sustainability in health care, education
and social services.
Governments evolving oversight role, where increasingly Broader
Public Service (BPS) partners deliver front-line services.
Increased intergovernmental cooperation and collaboration between
federal/ provincial/ municipal governments.
Advent of new technologies enabling integrated business and
financial solutions.
Increasing demand to elevate financial management function in
supporting programs, managing risk and leveraging strategic
outcomes.
 Controllership must exercise
Financial Leadership
During economic downturns, the role of the public sector financial
community is even more critical.
Our role is to provide government decision-makers with the best
financial information possible, so that they can make well informed
decisions amongst the competing public policy demands.
To be successful in this role, in supporting financial decision-
making, we must:
establish a robust financial management framework;
emphasize value for money and fiscal accountability;
balance immediate fiscal impacts with longer-term stewardship;
ensure appropriate controls are in place and functioning;
apply financial risk management principles; and
ensure transparency in financial reporting through public disclosure .
 Controllerships role in financial
management
The controller/controllership function plays a key financial management role
in making the governments business objectives achievable.
Controllership adds to the financial management discipline by providing
assurance of compliance with financial reporting and controls.
However, the controllership functions value is fully realized by supporting
decision-makers with financial analyses that identifies:
links between costs and performance;
opportunities to reduce direct and indirect costs; and
opportunities to increase delivery efficiency in meeting public policy goals.

Realizing this contribution can only happen when we fully apply advanced
management accounting, risk management, effective costing and revenue
management.
 Financial Management Transformation
Operator
Operator
Controllership:
Focused on the prudent use of
resources by standardizing,
consolidating and automating
processes.
Procedural policies.
Establishing financial data
integrity, timeliness and
accuracy
Steward
Steward
Results Planning:
Ensuring effective budgeting,
forecasting and planning
systems in place.
Asset/Capital Management.
Establish policy framework
Risk management and effective
controls
Strategist
Strategist
Decision Support:
Focused on performance
management and supporting
effective investment decisions
Ensure value-for-money
Policies that strengthen
performance by promoting
positive behaviours.
Effective BPS management
Robust Cost/Benefit analysis
Catalyst
Catalyst
Leader:
Support decision-makers and
identify opportunities for service
delivery transformation
Creates partnerships to drive
innovation and service delivery
efficiency
Finance integrated with policy and
operational considerations
Enterprise risk management
Effective horizontal management
 Required Financial Management Elements
Management Decision Support
Financial evaluation expertise
Business risk management expertise
Capital investment analysis expertise
Financial performance management
expertise
Business Planning, Fiscal Planning
and Budgeting
Strategic business planning expertise
Risk-based Fiscal planning expertise
Capital planning expertise
Integrated capital, operating and cash-
flow budgeting expertise
In-year fiscal management expertise
Accounting, Appropriations and
Financial Reporting
Accounting policy application and control
expertise
Appropriation compliance and control
expertise
Costing and pricing expertise
Financial reporting expertise
Financial information analysis and
integrity assurance expertise
Risk Management, Accountability and
Control
Program risk management and control
expertise
Project risk management and control
expertise
Asset and Liability risk management and
control expertise
Transfer Payment, Agency and Trust risk
management and control expertise.
 Financial Competencies
Needed
Business Knowledge

Effective Costing, Planning &

Evaluation

Risk Management

Value-
Strategic
Standards Compliance Valued-added
Advice Focus
for-
Money
Effective Communication

Performance Management

Forecasting, Planning and Budgeting

Accounting/ Financial Knowledge

Other functions of the Controller
In smaller firms, many other duties can fall
on the controller
Not worth our attention in the course?
Finance functions belong to a CFO if and
when the firm grows and one is hired
 A. The User of the Information
Managerial Accounting Financial Accounting
Primarily used by Primarily aimed at
internal users such as external users such as
company managers. investors, creditors,
and government
agencies.
 B. The Requirement
Managerial Accounting Financial Accounting
Generally accepted Publicly traded
accounting principles companies and many
is optional. Use any private companies use
reporting convention generally accepted
that is useful to accounting principles
management. for financial
accounting.

GAAP only
 C. The Level of Detail
Managerial Accounting Financial Accounting
Managers need detailed External users of
information to plan, information are often
control, and make satisfied with more
decisions about different summarized
organizational areas. information.
 D. The Emphasis on
Nonmonetary Information
Managerial Accounting
Monetary information is
supplemented with
additional detail such as
quantity of materials used,
number of labor hours, etc.
Financial Accounting
Primarily includes
information regarding
assets, liabilities,
equity, revenues,
expenses, and cash
flows.
 E. The Time Frame of Focus
Managerial Accounting Financial Accounting
Uses past performance to Primarily presents the
the extent it is useful results of past
in making predictions transactions.
about the future.