Chapter 1: Managerial
Accounting and the
Business Environment
Managerial Accounting
Branch of accounting that
identifies, measures, analyzes,
interprets, and communicates
financial information to
managers for the pursuit of an
organization’s goal
Accounting
Recording
Estimating Financial and
Organizing Operational
Data
Summarizing
Financial Accounting Managerial Accounting
Users Reports to those outside Reports to managers (internal
(external) the organization: users: running day-to-day
Owners (or shareholders) operations of the business such as
Creditors CFO, CEO, and managers of
Tax Authorities (BIR) different department) the
Regulators (SEC) organization for:
Planning
Controlling
Decision-making
Timefram Emphasizes financial Emphasizes decisions affecting
e consequences of past activities the future
(transactions and financial
reports already happened) Example: Getting a new
equipment
This new equipment will
manufacture this much number of
units compared to the old
equipment
Note: There is no test that secures
whether this number of units will
be generated
Data Emphasizes objectivity and Emphasizes relevance
verifiability
Timely given information even if it
That’s why we need proof (e.g., is not completely objective and
vouchers, official receipts, verifiable
delivery reports) because it
shows that the transaction or
the event already happened
Reports are released days or
months after the transactions
happened
When Emphasizes precision (whether Emphasizes timeliness
reporting the data included in the FS are (providing good estimates as soon
to users accurate or fairly stated) as possible rather than waiting for
precise data later)
Report Emphasizes companywide Emphasizes segment reports
Preparing consolidated FS or FS or report for only a particular
report for the entire company segment, product, department,
and geographical area.
Rules Must follow GAAP/IFRS Need not follow GAAP/IFRS
Mandatory for external reports Not mandatory
Example:
Before paying for your annual
tax to the BIR, financial
statements are required to be
submitted to the SEC
future performance) that
Work of Management compare actually results with
Managerial Accounting helps the budget are essential part
managers carry out three main of the control function
activities:
Decision-making
Planning Decision making involves
Establish goals making a selection among
Specify how goals will be competing alternatives
achieved What should we be
Develop budgets (detailed selling?
plan for the future that is Who should we be
usually express in formal serving?
quantitative terms) How should we
execute?
Controlling
The control function gathers
feedback to ensure that plans
are being followed (executed) Management Accounting in the
or modified as circumstance Management Process
change
Feedback in the form of
performance reports
(compares budgeted to
actual results to improved
4. An Enterprise Risk
Management Perspective
Management Accountant in the 5. A Corporate Social
Organization Responsibility and
Sustainability Perspective
6. A Process Management
Perspective
7. A Leadership Perspective
In an organization, we are seen in
department where we are needed
and which report or budget they
need help with.
Although normally, we are
reporting to the controller who
reports to the CFO because
finance is still our function.
Managerial Accounting: Beyond Chapter 2: Cost-
Numbers
The following seven (7) business Volume-Profit
management perspectives go Relationships
beyond the numbers to enable
intelligent planning, control and
decision making:
1. An Ethics Perspective
2. A Strategic Management
Perspectives
3. A Corporate Governance
Perspectives