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Management Accounting - M1 - Key Contents

Management accounting provides internal information to managers, focusing on specific parts of an organization. It is optional and aims to provide useful information at a lower cost. In contrast, financial accounting has legal requirements, describes the entire business at set times, and ensures objectivity and consistency for external users like investors. The management control cycle involves setting goals, executing activities, monitoring actual results, and using feedback and other information to re-adjust plans and goals.

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Claude Eckel
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45 views2 pages

Management Accounting - M1 - Key Contents

Management accounting provides internal information to managers, focusing on specific parts of an organization. It is optional and aims to provide useful information at a lower cost. In contrast, financial accounting has legal requirements, describes the entire business at set times, and ensures objectivity and consistency for external users like investors. The management control cycle involves setting goals, executing activities, monitoring actual results, and using feedback and other information to re-adjust plans and goals.

Uploaded by

Claude Eckel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Management Accounting – M1 – Key Contents

1. Distinction between Financial and Management Accounting


Financial Accounting Management Accounting
Legal Requirements for companies Entirely optional, only quality counts
Requirements depending on type, taxation Goal: useful info + benefits > cost
Scope & Focus Describes the whole business at Focuses on specific, small parts of the
certain moments in time organization, e.g. products, business
units, departments etc.
Regulation & Generally accepted accounting Only the usefulness of information for
Methodology principles (GAAP) and other decision making, planning and control
standards ensure objectivity, counts; subjectivity is inherent, MA
uniformity, consistency and allow depends on situation and on purpose
for inter-company and historical of the information gathered,
comparisons computed, and reported for
management
Time Describes the past, external Concerned as well with the past as
analysts use it for future decisions with future events (internal decisions)
Reporting Detailed set of accounts published At least monthly, depending on use
annually, quarterly for stock by management even daily or
exchange listed companies “realtime” (Management Cockpits ..)

Distinction between Financial and Managerial Accounting


Financial Accounting Managerial Accounting
Primary Users External – investors, creditors, and Internal – the company’s managers
government authorities
Purpose of Help investors and creditors make Help managers plan and control
Information investment and credit decisions operations
Focus and time Relevance and reliability of the Relevance of the information and
dimension of information and focus on the past focus on the future – example: 2014
the information – example: 2013 actual budget prepared in 2013
performance reported in 2014
Rules and Required to follow GAAP. Public Not required to follow GAAP
restrictions companies are required to be
audited by an independent CPA
Scope of Summary reports primarily on the Detailed reports on parts of the
information company as a whole, usually on a company (products, departments,
quarterly or annual basis territories), often on a daily or weekly
basis
Behavioral Concern about adequacy of Concern about how reports will affect
disclosures; behavioral implications employee behavior
are secondary

1
Management Accounting – M1 – Key Contents
2. The Management Control Cycle

Planning of economic
results = goal setting

Executing activities to
achieve economic goals

Apply measures to Apply measures to


improve execution re-adjust plan/goals
Steering while monitoring
according to plan/goals with respect to new
actual results, operational
set knowledge
and financial

Feed-back Feed-forward
Planning of economic
results = goal setting
Other information
sources

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