Chapter 1
Accounting for Management Ibrahim Sameer (MBA - Specialized in Finance,
B.Com – Specialized in Accounting & Marketing)
www.ibrahimsameer.wordpress.com
Information
• Data is the raw material for data processing. Data
relate to facts, events and transections and so
forth.
• Information is data that has been processed in
such a way as to be meaningful to the person
who receives it. Information is anything that is
communicated.
Information
• Qualities of good information
• Good information should be relevant, complete,
accurate (not completely accurate or 100%
accurate), clear, it should be inspire confidence,
it should be appropriately communicated, its
volume should be manageable, it should be
timely and its cost should be less than the
benefits it provides.
Planning, Control & Decision
Making
• Planning
• Information for management is likely to be used for
planning, control and decision making.
• Planning involve establishing objectives and
selecting appropriate strategies to achieve
those objectives.
• Planning can be short term or long term
Planning, Control & Decision
Making
• Objectives of organization
• An objective is the intent or aim or goal of an
organization (or an individual). A strategy is a
possible course of action that might enable an
organization (or an individual) to achieve its
objectives.
Planning, Control & Decision
Making
• Long term strategic Planning
• Long term strategic planning also known as
corporate planning, involves selecting
appropriate strategies so as to prepare a long term
plan to attain the objectives.
Planning, Control & Decision
Making
• Short term tactical Planning
• Short term tactical planning convert the corporate
planning into a series of short term plans, usually
covering one year, which relate to sections,
functions or department.
Planning, Control & Decision
Making
• Decision making
• Decision making always involves a choice
between alternatives and it is the role of the
management accountant to provide information so
that management can reach an informed decision.
Anthony’s View of Management
Activity
• Anthony divides management activities into
strategic planning, management control and
operational control.
• Management control is concerned with decisions
about the efficient and effective use of an
organization’s resources to achieve objectives or
target.
Management Control System
• A management control system is a system which
measures and corrects the performance of
activities of subordinates in order to make sure that
the objectives of an organization are being met
and the plans devised to attain them are being
carried out.
Types of Information
• Information within an organization can be analyzed
into three levels assumed in Anthony’s hierarchy
strategic, tactical and operational.
Types of Information
• Strategic information is used by senior manger.
Eg: Preparing Strategic Plan of the organization.
• Tactical information is used by the middle
management. Eg: Monthly variance report.
• Operational information is used by ‘front-line’
managers. Eg: Any routine work.
Financial Accounting & Cost &
Management Accounting
• Financial accounting systems ensure that the
assets and liabilities of a business are properly
accounted for, and provide information about
profits and so on to shareholders and other
interested parties.
• Management accounting systems provide
information specifically for the use of managers
within an organization.
Financial Accounting & Cost &
Management Accounting
• Cost Accounts
• Cost accounting and management accounting are
terms which are often used interchangeably. It is
not correct to do so. Cost accounting is part of
management accounting. Cost accounting
provides a bank of data for the management
accountant to use.
Financial Accounting & Cost &
Management Accounting
• Cost accounting is concerned with the following:
• Preparing statement (eg: budget, costing)
• Cost data collection
• Applying costs to inventory, product and services.
Financial Accounting & Cost &
Management Accounting
• Management accounting
• It is concerned with the following:
• Using financial data and communicating it as
information to users.
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