UNIVERSITY OF SAN JOSE-RECOLETOS

CPA REVIEW CENTER

INTEGRATED MANAGEMENT SERVICES MR. EDMAN P. FLORES, MBA, CPA

Module 1: Objectives, role and scope of management accounting

1. Objectives of management accounting

Management accounting is a specialized branch of accounting that provides information to managers to help them make
informed decisions about the future of their businesses. The objectives of management accounting are to:

• Decision Support: Management accounting provides relevant financial and non-financial data to guide strategic
and operational decisions. These include product pricing, cost-volume-profit analysis, investment appraisal, and
make-or-buy considerations.
• Operational Planning and Control: It facilitates budget preparation, variance analysis, and cost control
mechanisms. Through tools like standard costing and responsibility accounting, management can assess
departmental efficiency and promote accountability across functional areas.
• Performance Measurement: By using tools such as balanced scorecards, key performance indicators (KPIs), and
segment reporting, management accounting evaluates the profitability and productivity of organizational units. It
enhances decision-making around resource allocation and policy revisions.
• Employee Motivation and Behavior Control: Information generated from performance reports and incentive-
based measurements aligns individual actions with organizational objectives. This supports behavioral considerations
in budgeting and performance reviews.
• Stakeholder Communication: Internally, it supports cross-functional coordination. Externally, management
accounting can be extended to communicate strategic direction and financial viability to creditors, government
agencies, and investors through reports such as financial projections and feasibility studies.

2. Basic management functions and concepts

The basic functions of management are the essential activities that managers perform in order to achieve organizational
goals. These functions are:

• Planning: Involves setting organizational goals and formulating strategies to achieve them.
• Organizing: Focuses on structuring the organization by defining roles, responsibilities, and reporting lines. It
includes resource allocation, process design, and delegation—all necessary for ensuring organizational efficiency.
• Leading (or Directing): Concerns guiding and influencing people within the organization to meet objectives.
• Controlling: Refers to monitoring activities and ensuring performance aligns with plans. It includes tools like
variance analysis, audit trails, and benchmarking to identify deviations and initiate corrective actions.

These functions are interconnected: planning influences organizing, which requires effective leading, and all are
reinforced through controlling.

3. Management accounting vs Financial accounting

Management accounting Financial accounting

Information mainly Internal use e.g., managers and External use e.g., shareholders, creditors, and the
produced for employees. government.

Purpose of To aid planning, controlling and To record the financial performance in a period and
information decision making. the financial position at the end of that period.

Restrictions No mandatory rules for preparing Must follow GAAP when preparing financial
reports statements

Formats Management decides on the Format and content of financial accounts intending
information they require and the most to give a true and fair view should follow
useful way of presenting it. accounting standards and company law.

Nature of Financial and nonfinancial. Mostly financial.

information

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 Time period Historical and forward-looking. Mainly a historical record.

Aggregation Detailed information about product Information about overall firm

line, departments, etc. performance

COST accounting, while a separate discipline, is a subset of both management and financial accounting.

Test your understanding 1

1. Which of the following is the primary purpose of management accounting?

a. To provide information to external users
b. To track the costs of products and services
c. To help managers make decisions
d. To comply with accounting standards

2. A manager might use management accounting data to:

a. Track employee vacation days.
b. Decide whether to invest in new equipment.
c. Focus solely on marketing campaign slogans.
d. Primarily manage customer service interactions.

3. An example of how management accounting aids in controlling operations is:

a. Tracking social media follower count.
b. Solely analyzing customer satisfaction surveys.
c. Primarily focusing on website design aesthetics.
d. Creating a budget for the next year and monitoring performance.

4. Management accounting information can be used for:

a. Internal communication only within a company.
b. Solely for marketing and advertising purposes.
c. Communicating with stakeholders like investors and creditors.
d. Primarily used for communication with government agencies.

5. The planning function involves:

a. Primarily focusing on day-to-day operations.
b. Primarily resolving conflicts arising within teams.
c. Solely focusing on employee performance evaluations.
d. Setting goals, developing strategies, and creating action plans.

6. Assigning tasks and allocating resources falls under the function of:
a. Leading and motivating employees.
b. Organizing and establishing reporting relationships.
c. Solely controlling and monitoring progress towards goals.
d. Primarily focusing on performance measurement and evaluation.

7. Which function involves inspiring and motivating employees to achieve goals?

a. Planning and setting clear objectives.
b. Primarily focusing on data analysis and reporting.
c. Leading and creating a positive work environment.
d. Solely controlling performance and identifying deviations.

8. Monitoring performance and taking corrective actions is part of the:

a. Planning and setting goals for the future.
b. Controlling and ensuring progress aligns with plans.
c. Leading and motivating employees for achievement.
d. Organizing tasks and assigning resources efficiently.

9. Developing a company strategy for responding to anticipated new markets is an example of

a. planning.
b. controlling.
c. decision making.
d. all of these are correct.

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[Link] production variances and adjusting the production process is an example of
a. planning.
b. controlling.
c. decision making.
d. all of these.

11. A quantitative expression of a plan of action is called a(n)

a. strategic analysis report.
b. performance report.
c. financial statement.
d. budget.

12. A manager is setting goals for the next quarter. They want to increase sales by 10% and reduce costs by 5%. Which
function of management are they performing?
a. Planning
b. Organizing
c. Staffing
d. Controlling

13. Which of the following is the primary purpose of financial accounting?

a. To provide information to external users
b. To help managers make decisions
c. To track the costs of products and services
d. To comply with accounting standards

14. Management accounting

a. is more concerned with the future than is financial accounting.
b. is less concerned with segments of a company than is financial accounting.
c. is more constrained by rules and regulations than is financial accounting.
d. all of the above are true.

15. Which of the following statements about management or financial accounting is false?
a. Financial accounting must follow GAAP.
b. Management accounting is not subject to regulatory reporting standards.
c. Both management and financial accounting are subject to mandatory recordkeeping requirements.
d. Management accounting should be flexible.

16. Which of the following statements is true?

a. Management accounting is a subset of cost accounting.
b. Cost accounting is a subset of both management and financial accounting.
c. Management accounting is a subset of both cost and financial accounting.
d. Financial accounting is a subset of cost accounting.

17. Which one of the following statements is correct?

a. Management accounting information focuses on external reporting.
b. Financial accounting is broader in scope than management accounting.
c. Management accounting is playing an increasingly important role by helping managers develop and implement
strategy.
d. Financial accounting reports financial and nonfinancial information that helps managers implement company
strategies.

18. Which of the following statements refers to management accounting information?

a. There are no regulations governing the reports.
b. The reports are generally delayed and historical.
c. It primarily measures and records business transactions.
d. The audience tends to be stockholders, creditors, and tax authorities.

4. Roles and activities of controller and treasurer

Controller

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The controller serves as the chief architect of internal financial oversight. Reporting to the Chief Financial Officer, the
controller ensures that all accounting processes adhere to the PFRS and relevant SEC regulations, including the timely
preparation of the Annual 17-A report. Key activities include:

• Preparing monthly, quarterly, and annual financial statements (balance sheet, statement of comprehensive income,
cash flow statement) in accordance with PFRS and the Philippine SEC’s disclosure requirements.
• Designing and monitoring internal control systems—segregation of duties, approval hierarchies, and reconciliations—
to safeguard assets and prevent fraud.
• Overseeing the accounting cycle (journal entries, ledger maintenance, closing procedures) and supervising staff in
cost accounting, payroll, and accounts payable/receivable.
• Conducting variance analysis and rolling forecasts to support budgeting exercises and management decisions,
flagging deviations from approved budgets.
• Coordinating external audits and liaising with external auditors, the Bureau of Internal Revenue (BIR), and other
regulatory bodies to ensure compliance with tax and statutory reporting obligations.

Treasurer

The treasurer focuses on the company’s liquidity, funding, and financial risk management—functions that intersect
closely with commercial banks and capital markets. Reporting either to the CFO or directly to the CEO in smaller firms,
the treasurer’s core responsibilities include:

• Managing cash flow and working capital by forecasting daily cash requirements, optimizing collection and
disbursement cycles, and maintaining appropriate bank account structures.
• Negotiating and administering credit facilities—short-term loans, commercial papers, guarantees—with local and
international banking partners, ensuring covenant compliance and cost‐effective funding.
• Overseeing investments of surplus cash in BSP‐approved instruments (e.g., Treasury bills, time deposits) and
monitoring interest‐rate movements to maximize returns while preserving liquidity.
• Implementing hedging strategies for foreign‐exchange and interest‐rate exposures, using forwards, options, or swaps
in compliance with BSP Circulars on derivatives.
• Preparing treasury reports—daily cash summaries, funding forecasts, and debt schedules—for presentation to the
board’s finance committee, and collaborating with the controller to align reporting calendars.

Chief Financial Officer (CFO)

In Philippine organizations, the CFO occupies the apex of the finance function, synthesizing the controller’s internal
accounting governance and the treasurer’s external funding and risk‐management roles. Reporting directly to the Chief
Executive Officer and the Board of Directors, the CFO is accountable for aligning financial strategy with overall corporate
objectives, safeguarding enterprise value, and stewarding stakeholder trust. Key responsibilities include:

• Strategic Financial Leadership: Formulates long-term financial plans and capital-allocation strategies, leads due
diligence for potential investments/divestitures, and coordinates with legal and tax advisors to optimize shareholder
value.
• Integrated Planning, Budgeting, and Forecasting: Oversees enterprise-wide budgeting and rolling forecasts,
using driver-based models and scenario analyses to anticipate market fluctuations and operational risks.
• Performance Management and Analytics: Establishes KPIs and balanced-scorecard frameworks to translate
strategic goals into measurable outcomes and directs management-reporting processes for timely, data-driven
decisions.
• Capital Structure and Funding Optimization: Sets policy on debt-equity mix and dividend distribution, negotiates
funding facilities, and collaborates with the treasurer to monitor interest-rate and currency exposures.
• Investor Relations and Stakeholder Communication: Crafts disclosures and presentations for the SEC, PSE,
investors, bondholders, and credit rating agencies, and leads earnings calls and board-level finance committees.
• Risk Management and Corporate Governance: Oversees enterprise-risk frameworks, internal audit protocols,
and compliance with PFRS, BIR rules, and anti-money laundering legislation, championing ethical standards.
• Finance Organization Development: Builds high-performing finance teams through talent acquisition, competency
development, succession planning, and promotes continuous improvement and digital transformation.

5. Professional certifications in management accounting

In today’s practice, management accountants often pursue specialized credentials to validate expertise, meet employer
expectations, and earn Continuing Professional Development credits.

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• Certified Management Accountant (CMA): Offered by the Institute of Management Accountants (IMA), the CMA
requires two exam parts covering financial planning, performance management, and ethics, plus two years of
relevant work experience. It’s recognized by multinational firms and financial services companies worldwide.
• Chartered Institute of Management Accountants (CIMA) Diploma and Professional Qualification: CIMA’s
program starts with a certificate in business accounting and culminates in the professional qualification, which tests
strategic case studies, risk management, and decision making. Membership opens doors to roles in consulting,
treasury, and operations.
• Association of Chartered Certified Accountants (ACCA): ACCA combines financial reporting, audit, and
strategic business modules. Candidates complete up to 13 exams, an ethics module, and three years of practical
experience. ACCA’s broad syllabus appeals to firms needing both management and external audit expertise.
• CPA Canada (formerly CMA Canada): Since the unification of Canada’s accounting bodies, the CMA designation
merged into the Chartered Professional Accountant (CPA) credential. Aspiring management accountants in Canada
follow a competency map emphasizing strategic leadership, technical accounting, and integrated thinking.
• CPA Australia and Chartered Accountants Australia & New Zealand (CA ANZ): In Australia, the dominant
designations are CPA Australia and CA ANZ. Both require a university degree, professional exams covering financial
management and strategy, and a supervised practical experience period. These credentials are widely accepted in
Asia-Pacific corporate finance roles.

6. Global trends in management accounting

Management accounting continues to evolve as companies demand deeper insights, faster reporting, and stronger
governance. Here are key trends shaping the profession:

• Advanced Data Analytics and Automation: Routine tasks like variance analysis and budget consolidation are
increasingly automated through robotic process automation (RPA). Management accountants now focus on predictive
models, machine learning algorithms, and data visualization to drive strategic decisions.
• Sustainability and Integrated Reporting: Environmental, social, and governance (ESG) metrics have moved into
core reports. Firms publish integrated reports following the International Sustainability Reporting Frameworks and
incorporate carbon accounting and social impact KPIs into budgets.
• Driver-Based and Rolling Forecasts: Traditional static budgets give way to driver-based models that update in
real time. Management accountants build dashboards that recalculate forecasts when inputs—such as headcount or
raw material prices—change, enabling agile course corrections.
• Cross-Functional Business Partnering: Instead of siloed finance teams, management accountants embed within
marketing, operations, and IT units. They co-develop pricing analyses, cost-to-serve models, and make-versus-buy
studies that align financial targets with operational goals.
• Cloud ERP and Digital Collaboration: Cloud-based enterprise resource planning platforms reduce month-end
close times from weeks to days. Shared workspaces and real-time data feeds allow geographically dispersed finance
teams to collaborate on financial planning and analysis.
• Cybersecurity and Data Governance: As sensitive financial data moves online, management accountants partner
with IT to enforce access controls, encryption protocols, and audit trails. They also develop business continuity plans
to protect reporting integrity.

These developments underscore the shift of management accountants from back-office record keepers to proactive
strategists driving performance across the enterprise.

Test your understanding 2

19. Which of the following responsibilities is primarily within the scope of a company's controller?
a. Implementing hedging strategies for foreign-exchange exposures.
b. Overseeing investments of surplus cash in BSP-approved instruments.
c. Coordinating external audits and ensuring compliance with tax obligations.
d. Negotiating short-term loans and commercial papers with banking partners.

20. A company is experiencing significant fluctuations in its daily cash requirements and needs to optimize its collection
and disbursement cycles. Which role is most directly responsible for addressing these issues?
a. Controller
b. Treasurer
c. Chief Financial Officer
d. Chief Executive Officer

21. Controllership has attained special recognition in corporate management as business expands in complexity and
reach, and as the controller exerts influence for management to take organization’s goals. Controllership and
treasurership constitute corporate finance.

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 Which of the following are among the controller’s traditional functions?
1. Tax management.
2. Financial reporting and interpretation.
3. Credit management.
4. Sourcing and investing of funds.
5. Reporting to government regulatory agencies.
6. Risk management.

a. Items 1, 2, and 5 only.

b. Items 2, 3, and 5 only.
c. Items 1, 2, 3, 4, and 5 only.
d. All six items.

22. Which statement accurately describes the reporting structure of a controller in a typical Philippine organization?
a. The controller reports to the Treasurer.
b. The controller reports to the Board of Directors.
c. The controller reports to the Chief Financial Officer.
d. The controller reports directly to the Chief Executive Officer.

23. A multinational firm is looking to implement advanced internal control systems, including segregation of duties and
approval hierarchies. Who is primarily responsible for designing and monitoring these systems?
a. Treasurer
b. Controller
c. External Auditor
d. Chief Financial Officer

24. In the context of financial risk management, which role is specifically tasked with implementing hedging strategies
for foreign-exchange and interest-rate exposures?
a. Controller
b. Treasurer
c. Budget Analyst
d. Chief Financial Officer

25. Which of the following is a key responsibility of the Chief Financial Officer (CFO) in Philippine organizations?
a. Coordinating external audits with the BIR.
b. Supervising staff in cost accounting and payroll.
c. Overseeing daily cash summaries and funding forecasts.
d. Aligning financial strategy with overall corporate objectives.

26. When a company needs to conduct due diligence for potential investments and divestitures, coordinating with legal,
tax, and external advisors to optimize shareholder value, which finance role leads this effort?
a. Treasurer
b. Controller
c. Internal Auditor
d. Chief Financial Officer

27. Which global trend in management accounting involves embedding finance teams within marketing, operations, and
IT units to co-develop pricing analyses and cost models?
a. Driver-Based and Rolling Forecasts
b. Cloud ERP and Digital Collaboration
c. Sustainability and Integrated Reporting
d. Cross-Functional Business Partnering

28. The trend towards 'Sustainability and Integrated Reporting' primarily emphasizes what?
a. Delaying the publication of financial reports until all data is fully audited.
b. Focusing only on traditional financial statements without external factors.
c. Reducing the number of key performance indicators (KPIs) used in reporting.
d. Incorporating environmental, social, and governance (ESG) metrics into core reports.

29. How do 'Driver-Based and Rolling Forecasts' differ from traditional static budgets?
a. They focus solely on historical data points.
b. They eliminate the need for any budget planning.
c. They are updated in real time based on changing inputs.
d. They are prepared only once annually and are not subject to change.

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30. What is a significant benefit of 'Cloud ERP and Digital Collaboration' in management accounting?
a. Extended month-end close times due to complex systems.
b. Limited collaboration to only finance department personnel.
c. Increased reliance on manual data entry and paper-based records.
d. Reduced month-end close times and enhanced real-time data sharing.

PRACTICE TEST

1. Management accounting
a. is primarily for external users.
b. has no mandatory rules.
c. provides information based on historical information.
d. must adhere to GAAP.

2. Which of the following characteristics does not relate to management accounting?

a. It is subject to restrictions imposed by GAAP.
b. Accounting reports may include non-monetary information.
c. It provides data for internal users within the business organization.
d. Reports are often based on estimates and are seldom useful for anything other than the purpose for which they
are prepared.

3. In financial accounting, certain rules and regulations must be followed on how financial statements must be
presented to the reader. In managerial accounting, no such restrictions generally apply because it is:
a. A discipline that does not require preparation of other financial statements.
b. Designed to provide management with non-financial information for decision-making.
c. An entirely different field that need not observe the broad guidelines in financial accounting.
d. Designed to provide accounting and other financial data to assist management in making business decisions.

4. To distinguish between management accounting and financial accounting, the following statements are correct,
except
a. Financial accounting is bound by GAAP, and management accounting need not be in conformity with GAAP.
b. Financial accounting can be regarded as the process while management accounting can be regarded as the
product of the process.
c. Management accounting, in view of its various integrated recipients should have a separate data recording and
retrieval system from financial accounting.
d. Management accounting output must be released on time so as not to erode its usefulness; Financial
accounting output can still be useful even when delayed.

5. Management accounting
a. focuses on estimating future revenues, costs, and other measures to forecast activities and their results.
b. provides information about the company as a whole.
c. reports information that has occurred in the past that is verifiable and reliable.
d. provides information that is generally available only on a quarterly or annual basis.

6. The person MOST likely to use management accounting information is a(n)

a. banker evaluating a credit application.
b. shareholder evaluating a stock investment.
c. governmental taxing authority.
d. assembly department supervisor.

7. Which one of the following statements is correct?

a. Management accounting information focuses on external reporting.
b. Financial accounting is broader in scope than management accounting.
c. Management accounting is playing an increasingly important role by helping managers develop and implement
strategy.
d. Financial accounting reports financial and nonfinancial information that helps managers implement company
strategies.

8. Which of the following statements refers to management accounting information?

a. There are no regulations governing the reports.
b. The reports are generally delayed and historical.
c. It primarily measures and records business transactions.
d. The audience tends to be stockholders, creditors, and tax authorities.

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9. What is the primary management function that involves setting organizational goals and formulating strategies to
achieve them?
a. Organizing
b. Controlling
c. Leading
d. Planning

10. A manager is creating a chart of organization for their department. They are defining the roles and responsibilities of
each employee. Which function of management are they performing?
a. Planning
b. Organizing
c. Staffing
d. Controlling

11. A manager is reviewing the performance of their team. They are comparing actual results to goals, and identifying
areas for improvement. Which function of management are they performing?
a. Planning
b. Organizing
c. Staffing
d. Controlling

12. Ensuring compliance with accounting standards falls under the responsibility of the:
a. Controller
b. Treasurer
c. Marketing department
d. Human Resources department

13. Which one of the following is usually a treasurer’s function?

a. Tax administration
b. Planning for control
c. Protection of assets
d. Credit and collection

14. Which accounting role is responsible for overseeing internal financial oversight and ensuring compliance with PFRS
and SEC regulations?
a. External Auditor
b. Chief Financial Officer
c. Controller
d. Treasurer

15. Which core responsibility of the treasurer involves managing a company's day-to-day liquidity and ensuring optimal
cash levels?
a. Designing internal control systems.
b. Overseeing the accounting cycle.
c. Managing cash flow and working capital.
d. Preparing monthly financial statements.

16. An accountant is tasked with designing and monitoring internal control systems, including segregation of duties and
approval hierarchies, to prevent fraud. This activity falls under the responsibilities of which role?
a. External Auditor
b. Treasurer
c. Chief Financial Officer
d. Controller

17. Which statement best describes the interconnectedness of basic management functions according to the provided
information?
a. Controlling influences planning, which then dictates organizing and leading.
b. Organizing dictates planning parameters, which are then reinforced by leading and controlling.
c. Leading is a standalone function that, when combined with planning, enables organizing and controlling.
d. Planning influences organizing, which requires effective leading, and all are reinforced through controlling.

18. In the context of 'Advanced Data Analytics and Automation,' how has the role of management accountants evolved?
a. Their primary role has shifted to back-office record keeping, due to automation.
b. They now exclusively focus on manual data entry and report generation for historical analysis.
c. Their main task is to ensure compliance with past financial regulations, ignoring future trends.

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 d. They increasingly focus on predictive models, machine learning, and data visualization to drive strategic
decisions, moving beyond routine tasks.

19. A multinational corporation is considering a significant investment in a new product line. The decision relies heavily
on a detailed analysis comparing direct costs, variable costs, and potential revenue at different production volumes.
This type of analysis falls under which objective of management accounting?
a. Performance Measurement, using balanced scorecards for profitability.
b. Operational Planning and Control, relying on variance analysis and standard costing.
c. Employee Motivation and Behavior Control, aligning individual actions for strategic goals.
d. Decision Support, specifically incorporating cost-volume-profit analysis and investment appraisal.

20. An organization is struggling with prolonged month-end close times and seeks to improve real-time data access
across geographically dispersed finance teams. Which global trend in management accounting is most directly
addressing this challenge?
a. Sustainability and Integrated Reporting, by incorporating ESG metrics.
b. Driver-Based and Rolling Forecasts, by updating forecasts in real time.
c. Cybersecurity and Data Governance, by enforcing encryption protocols.
d. Cloud ERP and Digital Collaboration, through shared workspaces and real-time data feeds.

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