Management

Accounting

Presentation By:
Autor, Ivy Joy C.
11 – ABM
 Definition
Of
Management Accounting
Management accounting, also called managerial
accounting or cost accounting, is a process of analyzing
business costs and operations to prepare internal financial
report, records, and account to aid manager’s decision
making process in achieving business goals. In other words, it
is the act of making sense of financial and costing data and
translating that data into useful information for management
and officers within an organization.
 Glossary of Management Accounting
Budget Variance – The difference between the budgeted and actual
amounts of an item.
Contribution Margin – Sales revenues less variable expenses.
Contribution Margin Format – An income statement format that
shows the contribution margin (Sales – Variable expenses for a
segment.
Contribution to indirect expenses – Sales revenue less all direct
expenses of the segment.
Controllable profit of a segment – Profit of a segment when
expenses under a manager’s control are deducted from revenues
under that manager’s control.
Cost Object – A segment, product, or other item for which costs may
be accumulated.
Current replacement – The cost of replacing the present assets
Decentalization – The dispersion of decision – making authority
among individuals at lower levels of the organisation.
Direct Cost (expense) – A cost that is specifically traceable to a
given cost object.
Expense center – A responsibility center incurring only expense
items and producing no direct revenue from the sale of goods or
services. Examples include the accounting department and the
maintenance department.
Indirect cost (expense) – A cost that is not traceable to a given cost
object but has been allocated to it.
Investment center – A responsibility center having revenues,
expenses, and an appropriate investment base.
Management by exception – The principle that upper level
management does not need to examine operating details at lower
levels unless there appears to be a problem (an exception).
Margin (as used in ROI) – The percentage relationship of income (or
profits) to sales.
Margin = Income
Sales
Original Cost – The price paid to acquire an asset.
Profit center – A responsibility center having both revenues and
expenses.
Responsibility center – A segment of organization for which a
Return on investment (ROI) – Calculates the return (income) as a
percentage of the assets employed (investment)

Return on investment = Income or Income

Investment Sales

Segment – A fairly autonomous unit or division of a company defined

according to function or product line.
Transfer Price – An artificial price used when goods or services are
transferred from one segment to another segment within the same
company.
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