Management Accounting Course - Module One

Overview

• Focus: Understand how management accounting fits into a business and its importance.
• Differences: Managerial vs Financial Accounting.
• Topics Covered: Role of managers, trends in management accounting, and ethics.
• Purpose: To use accounting data to make better business decisions.

Why Management Accounting?

• Financial Accounting:
  • Create financial statements to assess profitability.
  • Essential for tax, investor attraction, and securing loans.
• Managerial Accounting:
  • Use financial data to make internal decisions, not reports for outsiders.
  • Helps in comparing new inventory sales and making business decisions.

Users of Accounting Information

• Financial Accounting:
  • External users like investors, banks, and government.
  • Focus on business-wide financial statements.
• Managerial Accounting:
  • Internal users like employees and managers.
  • Focus on department-specific data, e.g., sales performance of a new product.

Key Differences

• Financial Accounting:
  • Macro-level: Company-wide data.
  • Retrospective: Reports on past performance.
  • Verifiable: Must be audited.
  • Rules-based: Follows GAAP and IFRS.
• Managerial Accounting:
  • Micro-level: Specific departments or products.
  • Forward-looking: Includes budgeting and forecasting.
  • Not verifiable: Plans and budgets are not audited.
  • Flexible: No strict rules, focuses on sensible business practices.

Managerial Roles

• Planning: Drafting plans like architectural plans for projects (e.g., theme park rides).
• Directing: Ensuring the project follows the set plans and budgets.
• Controlling: Reviewing and adjusting plans based on progress and results.

Trends in Management Accounting

• Machine Learning & Data Analytics:
  • Increasing reliance on technology for decision-making.
  • Accountants need dual expertise in accounting and technology.
• Globalization:
  • Businesses face international competition, requiring efficiency.
  • Management accounting aids in maintaining competitive edge.

Ethics in Accounting

• Importance: Accountants hold significant trust from clients, akin to a car mechanic.
• Key Ethical Principles:
  • Competence: Must be capable of performing tasks correctly.
  • Confidentiality: Keep financial information private.
  • Integrity: Maintain honesty and uprightness in dealings.
  • Credibility: Ensure that statements and certifications are true.

Conclusion

• Module Focus: Lay the groundwork for understanding management accounting.
• Next Steps: Future modules will involve practical problem-solving and calculations.

Thank you for attending Module One. Stay tuned for further exploration of management accounting.