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MANAGERIAL
ACCOUNTING
MODULE 1: INTRODUCTION,
ORGANIZATIONAL PLANNING &
BUDGETING
DR AINUL HUDA JAMIL
ZCMA6022 MANAGERIAL ACCOUNTING
UKM-GRADUATE SCHOOL OF BUSINESS
SET 9 - SEM 1: 2023/2024
Objectives

At the end of this module, students must be able to:

1 Identify the concepts of planning, directing operation, decision making and performance evaluation.

2 Demonstrate thought process of decision making

Demonstrate ability to prepare and review relevant management accounting reports for/from
3
perspective of relevant stakeholders (e.g.: BOD, CFO, CEO, Senior Manager, HOD etc)

4 Demonstrate ability to source information and data in professional and ethical manner.
 MODULE 1:
INTRODUCTION, ORGANIZATIONAL PLANNING &
BUDGETING

MODULE 1.1 - Management Accounting Concept & Principles

MODULE 1.2 - Organizational Planning

MODULE 1.3 - Master & Operational Budgeting

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INTRODUCTION
MAN AGEME N T AC C OUN TI NG
CON CEPT & PRI N C I PL E
Accounting is a
language of
business
Business is about making
profits
 Basic Accounting

INCOME STATEMENT BALANCE SHEET

SALES (REVENUE) NON-CURRENT ASSETS

LESS: COST OF GOODS SOLD PLUS: CURRENT ASSETS
GROSS PROFIT TOTAL ASSETS
LESS: EXPENSES
LONG TERM LIABILITIES
NET PROFIT BEFORE TAX
PLUS: CURRENT LIABILITIES
LESS: TAX
PLUS: EQUITY (RESERVES & CAPITAL)
NET PROFIT BEFORE TAX
TOTAL LIABILITIES & EQUITY
 DEFINITION
Management Accounting is the
process of
identifying,
measuring,
analyzing,
interpreting, and
communicating
information in pursuit of an
organization's goals.
 Management Accounting vs
Financial Accounting

PRIMARY ACCOUNTING SOURCE OF

PURPOSE REGULATIONS
USERS PRODUCT DATA

Any internal Accumulates data

To help managers
Management Internal users plan, direct, and accounting report from financial and Depends on
internal guidelines
non-financial
Accounting (managers) control business deemed
information, & policies in the
operatons and worthwhile by
historaical data, organization
make business management
estimates and
decision
projecions

Conform to
Financial External users -
creditors,
To help external
users make Financial
Accumulates Malaysian
financial
Accounting stockholders, investing and statement
information data
Financial Reporting
Standards (MFRS)
regulators lending decisions & IFRS
Managerial Accounting Data

Historical Data Estimated Data

Objective measure Subjective measure

Past Operations Future Decisions

ORGANIZATIONAL
PLANNING
R OL E OF MA N AG E RI AL
ACCOUNTI N G FOR
OR GANI ZAT I ON AL PL ANNI NG
Crucial Role of Managerial Accounting
Five fundamental management processes that help organization attain their goals:

Planning Directing Controlling

Establish the plan and business Look into the cost elements to: Evaluate the performance of the
activities based on the goals of the Include all cost items organization using:
organization. Prepare the Master & Determine the cost behaviour Variance analysis
Operational Budget Estimate cost Balance scorecard
Prepare costing statement Suggest for next year's target

Improving Decision making

Continuous process improvement. Perform an analysis for decision making

Employees, business process, in terms of:
products Operational Expenses
To eliminate source of problems Capital expenditure

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 Provide information for business

Objectives of
decision-making

Assist managers in directing & controlling

Managerial
operational activities

Motivate managers and employees

Accounting towards the organisational's goals

Measure the performance of activities,

Activity subunits, managers & other employees.

Assess the organisation's competitive

position in the long run.
 Case Study 1
Gillian is working in the supply chain area of a major
manufacturer that produces the various mirrors found on cars
and trucks. Her first assignment is to determine whether it is
more cost effective and efficient for her company to make or
purchase a bracket used in the assembly of the mirrors. Her
questions are:

Why is the company considering this decision?

What information does she need?
Where would she find this information?
Would choosing the option with the lowest cost be the correct
choice?
Case Study 1
 Case Study 2
Alex has taken a position as a market analyst for a Fortune 500 company that operates in
the shipping industry. Her first assignment is to suggest and evaluate ways the company
can increase the revenue from shipping contracts by 10 percent for the year. Before
tackling this project, she has a number of questions. She begins with an analysis of the
company’s top fifty customers, including the prices they pay, discounts offered, discounts
applied, frequency of shipments, and so on, to determine if there are price adjustments that
need to be made to attract those customers to use the company’s shipping services more
frequently. Her questions are:

What is the purpose of this analysis?

What type of information does she need?
Where would she find this information?
Can she get it from a basic income statement and balance sheet?
How will she know if her suggestions for pricing are creating more shipping contracts
and helping to meet the company’s goal?
Case Study 2
 Simple Test MANAGEMENT PROCESS

1. Indicate whether the following statements are true or false:

a. Managerial accounting information is designed primarily to meet the needs of external users such as shareholders, creditors, and the
general public.
b. Managerial accounting reports must be prepared for the business as a whole.
C. Operational planning develops short-term actions for managing the day-to-day operations of the company.

2. Three phases of the management process are planning, controlling, and improving. Match the following descriptions to the
proper phase:

Phase of Management Process Management Process

Planning a. Monitoring the operating results and comparing the actual results with expected results

Controlling b. Rejects solving problems with temporary solutions that fail to address the root cause of the
problem

Improving c. Used by management to develop the companys objective

 MANAGERIAL ACCOUNTING IN ORGANIZATION:
TRAVEL COMPANY
GOALS PROCESS DESCRIPTION

Increase operations & profitability by expanding

countries of attracttions (outbound package).
Provide the best travel Planning
What package?Which cpuntries?
package to the customers,
expand group of customers, Directing
Running the travel agency on daily basis. How
many customers targeted? How many staff
establish various places of needed?
attractions in local & foreign
Expansion of business? Open new branch? How
countries Decision Making
to response to pandemic?

Observe the results of operations.

Controlling Have we accomplish the goals?
 Changing the focus of
managerial accounting
Non-Financial Technology &
Financial External Focus
Information Digitalization
Information Effectiveness of the
Quanitative organization Effective data
Assets % of defects Efficiency of production storage/cloud server
Liabilities No of customer & services Fintech solution
Revenue complaints Analytical system
Gross Profit Qualitative
Operating Expenses Customer
Satisfaction
Reputation
Organizational Structure
Understanding the responsibility
centres
Understanding the responsibility centres
Management Level Responsibility Centres Financial Responsibility Position

Top Management Investment Centre Corporate Profit, Investment of Capital (Assets) Board Director

Top Management Investment Centre Certain limits on investment, Earnings CEO, CFO

Finance Manager, HR Manager,

Middle Managers Profit Centre Operational Decision Sales Manager, Production
Manager

Accounts Executive, HR Executive,

Executive Position Profit Centre Generate Revenue
Sales Executive

Cutting department, Assembly

Line Position Cost Centre Incurred expenses
Department
How Manufacturing

Managerial
Example: Canon, Daihatsu

Accounting
Works in Retail
Example: Giant, Aeon

Different
Organization? Services
Example: Audit, Legal
How Managerial Accounting Works in Different
Organization?

MAIN OPERATION

OUTBOUND:
INBOUND: PROCESS:
Finished goods
Sales Packaging
Consultation services
Purchase Procedures
Tour package
Direct Labor

SUPPORTING ACTIVITIES

GENERAL
HUMAN RESOURCE MARKETING/FINANCE
ADMINISTRATIONS
 How Managerial Accounting Works in
Manufacturing - Furniture?

MAIN OPERATION

INBOUND:
PROCESS: OUTBOUND:
Sales - Furniture
Cutting Division Finished goods (Chairs,
Direct Material: Wood
Fixing Division Table, Sofa)
Direct Labor: Production
staff

SUPPORTING ACTIVITIES
GENERAL
HUMAN RESOURCE MARKETING/FINANCE
ADMINISTRATIONS
 Individual Exercise

1 3
2
Choose one Set your What will be
type of organization your
organization goals organization
inbound?

4 5 6

What is the What are the What are your

process? finished goods supporting
or services? activities?
 Group assignment - Case study

1 3
2
Search for a real Provide a brief What was the
case study of the scenario company’s
planning?

4 5 6
Which What was the What was the
department decision that has effect of the
involved with been made? decision?
the initiatives?
 BUDGETING
MAS TER & OPE RATI ON A L
BUDGETI NG
What is a Budget?

01 02 03 04

Detailed Plan Expressed in Specify how resources Performed during a

quantitative terms will be acquired & used specific period of time

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Purpose of Budgeting

Planning by subunit/division Facilitating communication & coordination

Allocating resources Controlling profit & operations

Evaluating performance Providing Incentives

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Methods of Budgeting
1 2 2
Step 3 4

Incremental Budget Zero-based Budget Priority-based Budget Activity-based Budgeting

Look at the percentage increase Establish a zero starting point Allocate the funds which are Develop the budget based on the
on the discretionary items during for each budget line and relevant to the strategy and expected activities & cost drivers
the previous period. requires continuous justification availability of resources. to meet the sales projection.
for each
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 Types of Budgets
Operational Master
S AL ES BUDG E T BUDGETED I N C OME S T A TEM ENT
DI R ECT LAB OUR BUDG E T BUDGETED BAL AN C E S HEET
DI R ECT MATE RI AL / PURCHA S E BUDGETED C AS H FL OW
BUDGET S TATEMENT
DI R ECT OVE RH E AD BUD GET
S AL ES/ GENERAL & ADMI NI S TRA TI V E
BUDGET
Components of Budget
Preparing the budget
Step 1 Step 2 Step 3 Step 4

Set the Determine the goods

Prepare operational
organizational goals, or services to be Start preparing the
budget -> master budget
business plan & offered sales or income budget
activities
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Operational Budget in
Manufacturing Company
Direct Overhead
Direct material Sales, General
Budget
Sales Budget budget Cost of
& Admin
Sales of finished
Cost of raw production Budget
materials other than
goods & services Sales &
direct material marketing cost
Direct labour & direct labour Depreciation of
Depreciation of fixed assets
budget
fixed assets used in admin
wages & salaries in
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used in work
production line
production
Operational Budget in
Retail/Service Company
Purchase Direct Overhead
Sales, General
budget Budget
Sales Budget Cost of
& Admin
Acquisition of
Sales of finished goods/services to production Budget
goods & services be sold other than Sales &
purchase & marketing cost
Direct labour direct labour Depreciation of
budget Overhead fixed assets
Cost of labour expenses in used in admin
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directly involved in retail shop work
retail/services
How to forecast sales

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Master Budget

Budgeted
Budgeted Budgeted
Income
Cash Flow Balance sheet
Statement
Cash receipts & Sales & expenses Assets
Cash disbursements Liabilities
Equities

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