Prepared by:

ZCMA 6022 : Managerial Accounting Nasuha Nordin

WHAT IS ACCOUNTING?
WHAT IS MANAGERIAL
ACCOUNTING?
 ASSESSMENT

Prepared by:
ZCMA 6022 : Managerial Accounting Nasuha Nordin
ASSESSMENT
Activities Individual
1 Exercise 1,2,3,4 5% each 20%
2 Individual Assignment
5 X 8% = 40% 8% each 40%

3 Group Oral Presentation

Group 5% 10%
Individual 5%
4 Final Write Up 30%
TOTAL 100%

AMONG THE ACTIVITIES

5
 INTRODUCTION

Prepared by:
ZCMA 6022 : Managerial Accounting Nasuha Nordin
 MANAGERIAL
IDENTIFY
ACCOUNTING

MEASURE

Managerial Accounting Definition: ANALYZE

the process of identification, measurement,

accumulation, analysis, preparation,
interpretation and communication of INTERPRETE
information used by management to plan,
evaluate and control within an entity and to
assure appropriate use of and accountability
for its resource (economics). Management COMMUNICA-
accounting also comprises the preparation of TING
financial reports for non-management groups
such as shareholders, creditors, regulatory
agencies and tax authorities
 PLAN

CONTROL
Managerial DECISION
MAKING
Accounting

DIRECTING
OPERATIONAL
ACTIVITIES
Role Of MA Information Within
Organization Decision Making
Planning
Product planning (revenue, costs), production planning (resource
availability and use by various products), strategy development
(organizations external environment)
Organization
Focusing on developing the organization systems that will
develop, produce and deliver organizations objectives such as
product quality and service levels to customers.
Information required include performance potential of different
production systems
Controlling
Focus on measuring and evaluating the performance of existing
organization systems and entities to identify how each is
contributing to achieve organizations objectives
Information required include system performance information
such as cost of producing products.

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Evolution of Management Accounting
Changes in the environment :
Globalization and technology competition on manufacturing companies
Increase of services industry
Deregulation of industry
New public management (NPM) label used for ambition of governmental
organization in many countries to run the public sector in more businesslike
manner.
Growth in nongovernmental organizations dealing with such economic
development and environmental

Effects on:
Require accurate and timely information
Increase accountability and performance measurement/management as well as
the cost of the process to meet the expectation of the customer

Traditional management accounting heavy reliance on financial information which

is too late, too aggregate and too distorted.

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 Changes Focus of
Management Accounting
Non financial information
Financial information Other quantitative Qualitative
(quantified in dollars sign) information information
-% of defects
-Assets -no. of customer - customer
-Liabilities complaints satisfaction
-Revenues -warranty claims -Employee
-Gross margin - units in inventory satisfaction
-Operating expenses - budgeted hours -Product or serve
quality
-Reputation

Integrate Both Financial And Non Financial Information

E.G. Balanced Score Card

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 Changes Focus of Management
Accounting

External Focus

- related to strategy gain

Internal Focus competitive advantage . E.g. value
chain analysis, strategic cost
Efficiency & effectiveness of management
company & units - information on customer E.g.
customer accounting, customer
profitability
- information on competitors
E.g. Benchmarking

Integrate both internal & external focus

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 Management vs. Financial Accounting

Accounting System
(accumulates financial and
managerial data)

Management Accounting Financial Accounting

Information for decision Published financial
making, and control statements and other
of an organizations financial reports.
operations.

Internal External
Users Users
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 Comparison of Financial and
Management Accounting
Financial Accounting Management Accounting
1. Users External persons who Managers who plan for
make financial decisions and control an organization
2. Time focus Historical perspective Future emphasis

3. Verifiability Emphasis on Emphasis on relevance

versus relevance verifiability for planning and control
4. Precision versus Emphasis on Emphasis on
timeliness precision timeliness
5. Subject Primary focus is on Focuses on segments
the whole organization of an organization
6. GAAP Must follow GAAP Need not follow GAAP
and prescribed formats or any prescribed format
7. Requirement Mandatory for Not
external reports Mandatory
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MANAGERIAL ACCOUNTING FINANCIAL ACCOUNTING

The reported expense of Reports the expenses

an operating department, incurred in total regardless
such as the assembly of sub-operating units of
department of an manufacturing
automobile plant or an
electronics company
eg: Cost of Good Sold
Eg: cost of direct labour of
assembly line, cost of direct
material for processing line

Examples Information
Managerial
Accounting

Financial
Accounting
 How can we see the
overall picture clearly?
PORTER VALUE CHAIN
 MAIN OPERATION

Out
In bound Process
bound

SUPPORTING ACTIVITIES

HR GENERAL
MARKETING
ADMINISTATION
Operational Flow
 MAIN OPERATION

Out
In bound Process
bound

RAW MATERIAL : FRAME

FRAME
DIVISION
WAREHOUSE LOGISTIC
WIP
FINISHED GOODS :
RAW MATERIAL : GLASS FRAMED WINDOW
WINDOW GLASS DIVISION
Why is Managerial Accounting
important to different level of
management within and
organization?
 Controllability
Principles

Responsibility
Centers

GOAL
CONGRUENCE

Responsibility
Accounting

Performance
Measure
 RESPONSIBILITY RESPONSIBILITY
CENTER ACCOUNTING
A responsibility center is an Responsibility accounting is an
organization unit for which a underlying concept of accounting
manager is made responsible for performance measurement
specific financial results. systems.
Underlying the accounting Under responsibility accounting,
classifications of responsibility managers performances are
centers is the concept of evaluated on matters directly
controllability under managers control.
The controllability principle
states that the manager of a
responsibility center should be
held responsible only for the
revenues, costs, or investment
that responsibility center
personnel control

Responsibility Accounting
RESPONSIBILITY CENTERS
COST
CENTER Cost incurring sub-unit
Eg: Painting Department

REVENUE
CENTER Revenue generating sub-unit
Eg: Sales Department

PROFIT
CENTER Profit generating sub-unit
Eg: Food Chain outlet

INVESTMENT
CENTER Sub-unit of profit and capital investment
Also responsible for decision of bonus paid out or reinvestment or
expansion etc
Eg: investment holding company within a group of companies
EXAMPLE?
Responsibility Centers Company
Level
Types of centres Types of financial Examples
responsibility
Cost Center Cost Perusahaan Otomobil Nasional Sdn.
Bhd. Manufacturing
Revenue Center Mainly on generating Proton Edar Sdn. Bhd. Sales
revenue with
relatively little costs
Profit Center Cost & Revenue Proton Tanjung Malim Sdn. Bhd.
Manufacturing and Sales
Investment Cost, Revenue & PROTON Holdings Berhad
Center (Single Investment Investment Holding
business unit )

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RESPONSIBILITY COMPANY LEVEL
PROTON GROUP
RESPONSIBILITY COMPANY LEVEL
PROTON GROUP
 Types of Role Organization Examples Types of
centres financial
Responsibility Centers by Designation responsibility
Corporate CEO PROTON responsible for Investment Center
Level Holdings Berhad PROTON (Single business unit )
GROUP

Division Level CEO Proton Marketing responsible for all Investment Center
Sdn. Bhd. the marketing arm (Single business unit )
of PROTON
GROUP

Company General Proton responsible for Cost & Revenue

Level Manager Tanjung Malim Sdn. operational
Bhd. decision

Department General Proton Edar Sdn. responsible for Revenue

Level Manager Bhd. generating revenue

Sub-Unit HOD Assembly Responsible for Cost

Level Department of assembly
Perusahaan department
Otomobil
Nasional Sdn. Bhd.
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 MODULE 1

Prepared by:
ZCMA 6022 : Managerial Accounting Nasuha Nordin
What is the purpose of Budget?
Primary Purpose of Budget
1. Planning
2. Facilitating communication &
coordination
3. Allocating resources
4. Controlling profit and operation
5. Evaluating performance
 Methods of Budgeting
1. Incremental budgeting take the previous year
budget as a base and add (or subtract) a percentage to
give this years budget.
2. Priority based budgets allocate funds in line with
strategy.
3. Zero based budgeting identifies the costs that are
necessary to implement agreed strategies and achieve
goals, as if the budget holder were beginning with a
new organizational unit, without any prior history.
4. Activity based budgeting develop budgets based
on the expected activities and cost drivers to meet
sales (or capacity) projections.
 Selling and Admin
Sales Budget Sales Budget Sales Forecast
Expenses Budget

Operational Production Direct Direct

Budget Budget Material
Direct Labor
Overhead

Financing
Budget Cash Budget

Budgeted Budgeted
Financial Financial Budgeted
Income
Budgeted Budgeted
Statement Statements Statement
Balance Sheet Cashflow
Master Budget: Operational Budgets

Detail
Budget
Detail
Budget
Detail

Production
Budget
Master
Budget
Covering all
phases of
a companys
operations.

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 MASTER
Sales Budget
BUDGET

Other
Financing
Operation
Budget
Budget
 Behavioral Impact of Budgets

Budgetary Slack: Padding the Budget

People often perceive that their performance will look
better in their superiors eyes if they can beat the
budget.

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 Participative Budgeting
Top Management

Middle Middle
Management Management

Supervisor Supervisor Supervisor Supervisor

Flow of Budget Data

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BUDGET EXAMPLE

BUDGET
CAPITAL BUDGET
What is capital budget?
What are the tool that you can use to
make decision on capital budgeting
1. Discounted Cash Flow Statement
a. Net Present Value
b. Internal Rate of Return
Other Handy knowledge & skills
Value Chain
Inventory System
Supply Chain Management
Basic Financial Ratios (get an example from
annual report of your Groups choice)
Organizational Chart
Report writing
Presentation skills
Data and information collection skills
 DIRECTING DECISION
PLAN CONTROL
OPERATION MAKING
End of Module 1

MODULE 1