1. GBS 520 :FINANCIAL AND MANAGEMENT ACCOUNTINGBy
Bryson Mumba

2. Management accounting
Introduction to
Management accounting

3. Management Accounting Course Outline
Unit 6: Costs
Costs and Cost Behavior
Cost Accounting techniques
 Unit 7: Information for Decision Making
Cost Volume Profit Analysis
Product Mix Decisions
Relevant costs and Operational Decisions
Relevant costs and Strategic Decisions

4. Management Accounting Course Outline (cont.)
Unit 8: Budgeting
Nature and Purpose of Budgeting
Budget Preparation
Flexible Budgets
Behavioral Aspects of Budgeting
 Unit 9: Budgetary Control and Reporting
 Unit 10: Working Capital Management
 Unit 11:Capital Budgeting

5. Management Accounting
What is Management Accounting?
Management accounting is the application of accounting and financial management to create, protect, preserve and increase value for the stakeholders of for-profit and not-for-profit enterprises in the public and private sectors(CIMA, Official Terminology, 2005)

6. Management Accounting
Management Accounting v Financial Accounting
COMPANIES
Management Accounting
Main Users
Financial Accounting
Management
Shareholders
None
Regulation
Statutory
Professional
Non-monetary
Quantitative
Qualitative
Data
Financial
Budgeted
Historical
Forecasted
Planned

7. Management Accounting
Main Functions
Planning &
Budgeting
Financial management
Control
Cost Accounting
Decision Making
Auditing

8. Management Accounting
Main Functions – Unit mapping
Planning:
Budgeting
Unit 8 & 11
Financial management
Unit 10 – working Capital Mgt
Control:
Unit 9
Cost Accounting:
Unit 6
Decision Making:
Unit 7
Auditing
Not part of this course

9. Management Accounting
Cost Accounting is at the core of management accounting

10. Accounting Information System
Management Accounting Reports
Inputs
Processing
Outputs
Source Documents
Accounting Cycle
Financial Statements:
Statement of Financial Position(Balance Sheet)
Statement of Comprehensive Income(Income Statement)
Statement of Cash Flows
Statement of Owners’ Equity

11. Cost Information and the Management Cycle
One of a company’s primary goals is to be profitable
Owners expect to earn a profit
Managers have a responsibility to
Use resources wisely
Generate revenues that will exceed the costs of the company’s operating, investing, and financing activities

12. Use of Cost Information in the Management Cycle
During the management cycle, managers use information about costs to
Plan
Execute
Review
Report

13. Planning Manufacturing companies
Managers use estimates of product costs to
Develop budgets for production, materials, labor, and overhead
Determine the selling price or sales level required to cover all costs

14. Executing Manufacturing companies
Managers use estimated product costs to
Predict the gross margin and operating income on sales
Make decisions about matters such as
Dropping a product line
Outsourcing the manufacture of a part
Bidding on a special order
Negotiating a selling price

15. Executing (cont’d) Retail companies
Managers use the estimated cost of merchandise purchases to
Predict the gross margin, operating income, and the value of merchandise sold
Make decisions about matters such as
Reducing selling prices for clearance sales
Lowering selling prices for bulk sales
Dropping a product line

16. Executing (cont’d) Service organizations
Managers use the estimated cost of services to
Estimate profitability
Make decisions about matters such as
Bidding on future business
Lowering or negotiating fees
Dropping a service

17. Reviewing
Managers want to know about significant differences between estimated costs and actual costs
Identification of variances helps determine the causes of overruns
Useful in order to avoid such problems in the future

18. Reporting Managers expect to see the following reports
Performance reports that summarize the variance analyses done in the reviewing stage
Product profitability reports
Budgeted v actual costs
Capital budgeting/investment analysis reports
Working capital management reports
Financial statements

19. THE END
THANK YOU