q

G H

ACCA

Approved

Workbook

Foundations in Accountancy/ACCA

Management Accounting (FMA/MA)

For exams from 1 September 2021

to 31 August 2022

Free access to eBook & additional digital content

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Foundations in

Accountancy/ACCA

Management

Accounting

(FMA/MA)

G H

Workbook

For exams from 1st

September 2021 to 31st

August 2022

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Firstedition2021
Anoteaboutcopyright
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Contents

Introduction
Helping you to pass v
Introduction to the Essential reading vii
Introduction to Management Accounting (FMA/MA) ix
Essential skillsareas to be successful in Management Accounting (FMA/MA) xii

1 Accounting for management 1

2 Data and presenting information 17
3 Cost classification and behaviour 41
4 Forecasting 65
5 Summarising and analysing data 99
Skillscheckpoint 1 127
6 Accounting for materials 135
7 Accounting for labour 167
8 Accounting for overheads 187
9 Process costing 223
10 Costing methods 251

G
11 Setting budgets 279 H

12 Implementing budgets 303

Skillscheckpoint 2 317
13 Project appraisal 325
Skillscheckpoint 3 353
14 Standard costing 359
15 Variance analysis 377
Skillscheckpoint 4 419
16 Target setting 427
17 Financial performance measurement 443
18 Assessing non-financial performance 463
Skillscheckpoint 5 479

Essential Reading
Accounting for management 485
Data and presenting information 489
Cost classification and behaviour 495
Forecasting 503
Summarising and analysing data 509

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Accounting for materials 517
Accounting for labour 523
Process costing 527
Costing methods 533
Setting budgets 543
Implementing budgets 549
Project appraisal 557
Standard costing 561
Variance analysis 567
Target setting 573
Financial performance measurement 577
Assessing non-financial performance 581

Further question practice 587

Further question solutions 615
Appendix1:Formulae sheet given in the exam 636
Glossary 643
Index 655
Bibliography 663
G H

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Helping you to pass

BPP Learning Media – ACCA Approved Content Provider

Asan ACCAApprovedContentProvider,BPPLearningMediagivesyou the opportunityto use
study materialsreviewedby the ACCAexaminingteam. Byincorporatingthe examiningteam’s
commentsand suggestionsregardingthe depth and breadth of syllabuscoverage,the BPP
LearningMediaWorkbookprovidesexcellent,ACCA-approved supportforyourstudies.
Thesematerialsare reviewedby the ACCAexaminingteam. Theobjectiveof the reviewis to
ensurethat the materialproperlycoversthe syllabusand study guideoutcomes,used by the
examiningteam insettingthe exams,inthe appropriatebreadth and depth. Thereviewdoes not
ensurethat everyeventuality,combinationor applicationof examinabletopicsis addressed by
the ACCAApprovedContent.Nordoes the reviewcomprisea detailedtechnicalcheckof the
contentas the ApprovedContentProviderhas its ownqualityassurance processesinplace inthis
respect.
BPPLearningMediado everythingpossibleto ensurethe materialis accurate and up to date
whensendingto print.Inthe eventthat any errorsare foundafter the printdate, they are
uploadedto the followingwebsite:www.bpp.com/learningmedia/Errata.
The PER alert
Beforeyou can qualifyas an ACCAmember,you not onlyhaveto pass allyourexamsbut also
fulfila three-yearpracticalexperiencerequirement(PER).Tohelpyou to recogniseareas of the
syllabusthat you mightbe able to apply inthe workplaceto achievedifferentperformance
objectives,wehaveintroducedthe ‘PERalert’feature (seethe nextsection).Youwillfindthis
feature throughoutthe Workbookto remindyou that what you are learningto pass yourACCA
examsis equallyusefulto the fulfilmentof the PERrequirement.Yourachievementof the PER
shouldbe recordedinyouronlineMyExperiencerecord.
G H

Management
Accounting
(FMA/MA)v
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Keyto icons
Keyterm
Centralconceptsare highlightedand clearlydefinedinthe Keytermsfeature.
Keytermsare also listedinboldinthe Index,forquickand easy reference.

Formulato learn
Thisboxedfeature willhighlightimportantformulawhichyou need to learnfor
yourexam.

PERalert
Thisfeature identifieswhensomethingyou are readingwillalso be usefulforyour
PERrequirement(see‘ThePERalert’sectionaboveformoredetails).

Realworldexamples
Thesewillgivereal examplesto helpdemonstratethe conceptsyou are reading
about.

Illustration
Illustrationswalkthroughhowto apply keyknowledgeand techniquesstep by step.

Activity
Activitiesgiveyou essentialpracticeof techniquescoveredinthe chapter.

Essentialreading
G H

Linksto the Essentialreadingare giventhroughoutthe chapter. TheEssential

readingis includedinthe freeeBook,accessed viathe ExamSuccessSite(seeinside
coverfordetailson howto access this).

Atthe end of each chapter you willfinda Knowledgediagnostic,whichis a summaryof the main
learningpointsfromthe chapter to allowyou to checkyou haveunderstoodthe keyconcepts.You
willalso finda Furtherstudy guidancewhichcontainssuggestionsforwaysinwhichyou can
continueyourlearningand enhance yourunderstanding.Thiscan include:recommendationsfor
questionpracticefromthe Furtherquestionpracticeand solutions,to test yourunderstandingof
the topicsinthe Chapter; suggestionsforfurtherreadingwhichcan be done,such as technical
articles;and ideas foryourownresearch.

Introduction vi
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Introduction to the Essential reading

Theelectronicversionof the Workbookcontainsadditionalcontent,selectedto enhance your

studies.Consistingof revisionmaterialsand furtherexplanationsof complexareas (including
illustrationsand activities),it is designedto aid yourunderstandingof keytopicswhichare
coveredinthe mainprintedchapters of the Workbook.TheEssentialreadingsectionof the eBook
also includesfurtherillustrationsof complexareas..
Asummaryof the contentof the Essentialreadingis givenbelow.
Chapter Summary of Essential reading content
1 Accountingformanagement • Detailon strategic,tactical and operational
information.
2 Data and presenting • Samplingexamples:randomsampling,stratified
information sampling,systematicsampling,multistagesampling
3 Cost classificationand • Differenttypes of cost behaviour,eg non-linear,
behaviour curvilinearvariablecosts
• Linearequations
• Differenttypes of codingsystem
4 Forecasting • Movingaverageswithan evennumberof results
• Adjustingseasonalvariationsusinga multiplicative
model
5 Summarisingand analysing • Advantagesand disadvantagesof differenttypes of
data average
• Calculatingprobabilitiesusingz scores
G
6 Accountingformaterials • Detailon the differenttypes of inventorycost H

7 Accountingforlabour • Labourrecords,eg timesheets

8 Accountingforoverheads Thereisno essentialreadingforthischapter
9 Processcosting • Howto deal withlosseswitha disposalcost
• Dealingwithdifferentrates of input
10 Costingmethods • Illustrationof jobaccounts
• Illustrationof cost per unitcalculationinservice
businesses
• Accountingforby-products
• Howjointproductsare incorporatedintoprocess
accounts
11 Settingbudgets • Administrationof the budget
• Detailon controllablecosts
• Preparingthe capital budget
12 Implementingbudgets • Attitudesto budgeting
• Cost reductionprogrammes
• Detailon valueanalysis
13 Projectappraisal • Calculatingdiscountedpayback
14 Standard costing • Standard cost card activitiesusingabsorptionand
marginalcosting
• Illustrationof variancecalculationsusingflexedbudget

vii Management
Accounting
(FMA/MA)
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Chapter Summary of Essential reading content
• Detailon whenfixedand flexedbudgets are
appropriate
15 Varianceanalysis • Materialvarianceswhenthere is closinginventory
• Reasonsforfixedoverheadvariances
• Causes of sales variances
• Informationon possiblecontrolaction
16 Targetsetting • Governmentinfluenceon businesses
17 Financialperformance • Managementperformancemeasures
measurement
18 Assessingnon-financial • Performancemeasuresforserviceindustries,
performance manufacturing,contract and processcosting
environments

G H

Introduction viii
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Introduction to Management Accounting (FMA/MA)

Overall aim of the syllabus

Todevelopknowledgeand understandingof managementaccountingtechniquesto support
managementinplanning,controllingand monitoringperformanceina varietyof business
contexts.
The syllabus
Thebroad syllabusheadingsare:
A Thenature, sourceand purposeof managementinformation
B Data analysisand statisticaltechniques
C Cost accountingtechniques
D Budgeting
E Standard costing
F Performancemeasurement

Maincapabilities
On successfulcompletionof thisexam,you shouldbe able to:
A Explainthe nature, sourceand purposeof managementinformation
B Explainand analyse data analysisand statisticaltechniques
G
C Explainand apply cost accountingtechniques H

D Preparebudgets forplanningand control

E Compareactual costs withstandard costs and analyse any variances
F Explainand apply performancemeasurementsand monitorbusinessperformance

Linkswithother exams
ThePerformanceManagement(PM)syllabusassumesknowledgeacquiredinManagement
Accounting(MA/FMA) and developsand appliesthisfurtherand ingreater depth.
AchievingACCA’sStudyGuideLearningOutcomes
ThisBPPWorkbookcoversallthe ManagementAccounting(FMA/MA) syllabuslearningoutcomes.
Thetables belowshowinwhichchapter(s)each area of the syllabusiscovered.
A Thenature, sourceand purposeof managementinformation

A1 Accountingformanagement Chapter 1
A2 Sourcesof data Chapter 2
A3 Cost classification Chapters 3, 17
A4 Presentinginformation Chapter 2

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B Data analysisand statistical techniques

B1 Samplingmethods Chapter 2
B2 Forecastingtechniques Chapters 3, 4
B3 Summarisingand analysingdata Chapter 5
B4 Spreadsheets Chapter 2 (and Checkpoint
2)

C Cost accountingtechniques

C1 Accountingformaterial,labourand overheads Chapters 6, 7,8

C2 Absorptionand marginalcosting Chapter 8
C3 Cost accountingmethods Chapters 9, 10
C4 Alternativecost accountingprinciples Chapter 10

D Budgeting

D1 Natureand purposeof budgeting Chapter 11

D2 Budgetpreparation Chapters 11,14
D3 Flexiblebudgets Chapter 14
D4 Capitalbudgetingand discountedcash flow Chapters 11,13
G H

D5 controland reporting Chapters 12,14,15,17Budgetary

D6 Behaviouralaspects of budgeting Chapter 12

E Standard costing

E1 Standard costingsystem Chapters 14,15

E2 Variancecalculationsand analysis Chapter 15
E3 Reconciliationof budgeted and actual profit Chapter 15

F Performancemeasurement

F1 Performancemeasurement- overview Chapter 16

F2 Performancemeasurement- application Chapters 16,17,18
F3 Cost reductionsand valueenhancement Chapter 12
F4 Monitoringperformanceand reporting Chapters 16,17,18

Thecompletesyllabusand study guidecan be foundby visitingthe examresourcefinderon the

ACCAwebsite:www.accaglobal.com/gb/en.html.

Introduction x
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Theexam
Computer-basedexams
Computer-basedexaminations
(CBEs)areavailableforalloftheFoundations
inAccountancy
exams.TheCBEexams forthefirstsevenmodulescanbetakenatanytime;thesearereferred
to
as‘examsondemand’.TheOption exams canbesatinJuneandDecember ofeachyear;these
arereferred
toas‘exams
onsitting’.FormoreinformationonCBEexams andtoaccessSpecimen
examsintheCBEsoftware,pleasevisittheACCAwebsite.

Howdo CBEs work?

• Questions
aredisplayed ona monitor.
• Candidatesentertheiranswerdirectly
ontothecomputer.
• Candidateshavetwohours tocomplete theexamination.
• Candidatessitting
exams ondemand areprovidedwitha Provisional
ResultNotification
showing
theirresultsbefore
leavingtheexaminationroom.
• TheCBELicensed Centreuploadstheresults
totheACCA(asproofofthecandidate’s
performance)within72hours.
• Candidatessitting
theOptionexams willreceive
theirresults
approximatelyfiveweeks
after
theexamsittingoncetheyhavebeenexpert marked.
• Candidatescanchecktheirexamstatus ontheACCAwebsite byloggingintomyACCA.
Benefits
• Flexibility
– thefirstsevenmodules,
examsondemand canbesatatanytime.
• Resitsforthefirstsevenmodules
canalsobetakenatanytimeandthereisnorestriction
on
thenumber oftimes a candidate
cansita CBE.
• Instantfeedback fortheexamsondemand asthecomputer displays
theresults
attheendof
G theCBE. H

Formoreinformation oncomputer-basedexams,visittheACCAwebsite.
www.accaglobal.com/gb/en/student/exam-entry-and-administration/computer-based-
exams.html

xi Management
Accounting
(FMA/MA)
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Essential skills areas to be successful in Management
Accounting (FMA/MA)

Wethinkthere are three areas you shoulddevelopinorderto achieveexamsuccessinFMA/MA:

(a) Knowledgeapplication
(b) SpecificManagementAccountingskills
(c) Examsuccessskills
Theseare showninthe diagrambelow.

msuccess
Exa skills
swe
An r plann
ing
Co
on MA/FMA
ecific
Sp ski
lls of rrec
mati
r req tin
fo
in uir te
g Approach
to Excel
and emrpr
gin
a objective
test calculator en eta
an (OT)
questions skills ts tio
M n

G Multi-task Project
oo questions appraisal sis
d questions lny
a
tim a
em Variance cal
questions i
an
ag umer
em
ent ntn
ie
c
Effi
Effectivewriting
G andpresentation H

Specific FMA/MAskills
Theseare the skillsspecificto FMA/MAthat wethinkyou need to developinorderto pass the
exam.
InthisWorkbook,there are fiveSkillsCheckpointswhichdefineeach skilland showhowit is
appliedinansweringa question.Abriefsummaryof each skillis givenbelow.
Skill1:Approachto objectivetest (OT)questions
TheFMA/MA examcontainstwosections.SectionAconsistsof 35 objectivetest (OT)questions
worth2 markseach and SectionBcontains3 multi-taskquestionsworth10markseach. The
multi-taskquestionsare made up of OTquestionsand thereforebeingable to answerOT
questionseffectively,is extremelyimportant.
Astep by step techniqueis outlinedbelow.

Introduction xii
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GeneralguidanceforapproachingOTquestions
STEP1: Answerthe questionsyouknowfirst.
Ifyou’rehavingdifficulty
answeringa question,moveonandcomebackto tackleit
onceyou’veansweredallthequestionsyouknow.
Itisoftenquickerto answerdiscursive
styleOTquestionsfirst,leavingmoretime
forcalculations.

GeneralguidanceforapproachingOTquestions
STEP2: Answerallquestions.
ThereisnopenaltyforanincorrectanswerinACCAexams;thereisnothingto be
gainedbyleavinganOTquestionunanswered. Ifyouarestuckona question,asa
lastresort,itisworthselectingtheoptionyouconsidermostlikelyto be correct
andmovingon.Flagthequestion,soifyouhavetimeafteryou’veansweredthe
restofthequestions,youcanrevisitit.

GuidanceforansweringspecificOTquestions
STEP3: Readthe requirementfirst!
Therequirementwillbe statedinboldtextintheexam.Identifywhatyouare
beingaskedto do,anytechnicalknowledgerequiredandwhattypeofOT
questionyouaredealingwith.Lookforkeywordsintherequirementsuchas
"whichTWOofthefollowing," or" whichofthefollowing
isNOT".

G GuidanceforansweringspecificOTquestions H

STEP4: Applyyourtechnicalknowledgeto the data presentedinthe question.

Takeyourtimeworkingthroughcalculations,
makingsureto readthrougheach
answeroptionwithcare.OTquestionsaredesignedsothateachansweroption
isplausible.Workthrougheachresponseoptionandeliminatethoseyouknow
areincorrect.

SkillsCheckpoint1coversthistechniqueindetailand highlightsthe differenttypes of OTquestion

that you are likelyto see inyourexam.
Skill2: Exceland calculatorskills
Thischeckpointcoverstwoareas - usingspreadsheetsand usingyourscientificcalculator.
Spreadsheetsare specificallymentionedon the FMA/MA syllabusand you can expectto see
questionsthat requireyou to apply yourknowledgeof spreadsheetsto managementaccounting
questions.Forexample,questionsmay showyou an extractof a budget spreadsheetand ask you
to selectthe correctspreadsheetformulato calculatea particularfigure.
Youmustbe able to use yourcalculatorquicklyand correctlyinthe exam.Theabilityto calculate
the correctanswerefficientlyis a fundamentalskillinmanagementaccounting.Youwillhave
moretimeforthinkinginthe examifyou can makebest use of yourcalculatorto get the right
answer.Forexample,you mustbe able to use yourcalculatorto calculatethe correlation
coefficient,EOQformulaand standard deviation.

xiii Management
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Hereis an exampleof a typicalscientificcalculator:

REPLAY
Thisallowsyouto changeanypartoftheseriesof COMPmodeistheusualsettingfor
keysyouhavepressed calculations.STATmodeletsyoudo
Thisletsyougo backto previouscalculations statisticalcalculations

SHIFT
RECIPROCAL
Pressingthiskeyfollowed
bya secondkeyperforms Thisrecalculates
the
thealternativefunctionof numberdisplayedas1
thesecondkey overthatnumber 1
x
FRACTIONS
Thisletsyouputa fraction POWER andROOT
intoa calculation
without PresstheSHIFT button
havingto convertitinto beforethisbuttonif
a decimal youwantto finda root.
Thisisthesameas ,
yxor xy
NEGATIVE
Averyusefulbutton DELETE
forminusnumbers
G
Usedwiththereplay H

button,thisallowsyou
BRACKETS to go backandcorrect
Theseareusedjustlikeyou yourcalculation
writea calculation
sothatit
isdoneintherightorder

ANSWER EQUALS
Thisstoresthelast Inputthecalculation
calculation
result expressionsastheyare
writtenthenpress=
to executeit

SkillsCheckpoint2 coversthe use of yourcalculatorindetailusingan exam-standardquestion.

Skill3: Projectappraisal questions
Thesyllabusstates that you shouldbe able to ‘calculateNPV,IRRand payback (discountedand
non-discounted)’.However,the MA/FMA examiningteam reportrepeatedlysays that a common
problemforstudents,particularlyinSectionBquestions,is the calculationof payback, NPVand
IRR.Thischeckpointlooksat these calculationsindetailusingexamstandard questions.

Introduction xiv
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Skill4: Variancequestions
Variancequestionsare verylikelyto appear inyourexaminsomeform.
Inorderto answervariancequestionswell,you need to ensurethat you:
• Havelearntthe varianceformulae
• Understandthe differencesbetweenmarginalcostingsystemvariancesand absorption
costingsystemvariances
• Understandthe formatof an operatingstatement
• Understandthat variancescan be calculatedusinga flexedbudget to comparelikewithlike
SkillsCheckpoint4 coversvarianceanalysisindetailusingan exam-standardquestion.
Skill5: Multi-taskquestions
Multi-taskquestions(MTQs)inSectionBcomprise30%of yourexam(viathree 10-markquestions,
brokendownintosub-questionsof varyingmarkallocations).Itis thereforeimportantthat you
giveadequate revisiontimeto practisingthese questions.
ThebiggestdifferencebetweenSectionAOTQsand SectionBMTQsis the waythey are
presented.Forexample,an OTQis alwaysworthtwomarksand any fillinthe blankOTQsare
likelyto onlyneed a singleanswer.MTQsare made up of several‘tasks’and sometasks may be
worthmorethan others.Forexample,an MTQcouldcontaina task showinga table withseveral
fillinthe blankboxes,forsay, sixmarks,followedby twoOTQsworthtwomarkseach (totalMTQ
score=10marks).Evenifyou get one of the answersinone of the boxesincorrect,thiswillnot
affect yourabilityto scoreon the otheranswerboxes.Fillinthe blankquestionsrequireaccurate
calculationand carefulnumberentry, so it’sworthtakingyourtimeoverthese types of question
SkillsCheckpoint5 coversthistechniqueusingan exam-standardquestion.
Examsuccess skills
Passingthe FMA/MA examrequiresmorethan applyingsyllabusknowledgeand demonstrating
G
the specific skills;it also requiresthe developmentof good examtechniquethroughquestion H

practice.
Weconsiderthe followingskillsto be vitalforexamsuccess.TheSkillsCheckpointsshowhow
each of these skillscan be appliedinthe exam.
1 Exam success skill 1
Managinginformation
Itis easy forthe amountof informationcontainedina particularquestionto feela little
overwhelming.
Adviceon developingManaginginformation
Approach
Theexamis 2 hourslong.Thereis no designated‘reading’timeat the start of the exam,however,
one approach that can workwellis to start the examby spendinga fewminutescarefullyreading
throughallof the questionsto familiariseyourselfwiththe examand the topicsinSectionB.
Nextconsiderthe orderinwhichyou willattempt the questions;alwaysattempt theminyour
orderof preference.Forexample,you may wantto leaveto last the questionyou considerto be
the mostdifficult.
Ifyou findthat thisapproach doesn’tworkforyou, don’tworry– you can developyourown
technique.
Activereading
Activereadingis a usefultechnique.Itinvolvesfocusingon the requirementsfirston the basis
that, untilyou havedone this,the detailinthe questionwillhavelittlemeaningand willseemmore
intimidating.

Management
Accounting
(FMA/MA)xv
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2 Examsuccessskill2
Correctinterpretation oftherequirements
Identify
fromtherequirement thetypeofOTquestion. Thisisespecially
important
withmultiple
response options (MRO)toensure youselectthecorrect
number ofresponse
options.
Itisalso
important forfillintheblankquestions
astheymaytellyoutogiveyouranswer toa certain
number ofdecimal placesortothenearestthousand dollars.
Adviceondeveloping correctinterpretation
oftherequirements
Thisskillcanbedeveloped byanalysingquestion requirementsandapplying
thisprocess:
Step1 Readtherequirement
Firstly,
readtherequirement
a couple
oftimes
slowly
andcarefully.
Step2 Readtherestofthequestion
Byreading therequirement
first,youwillhaveanideaofwhatyouare
lookingoutforasyoureadthrough thescenario.
Thisisa greattime
saverandmeans youdon’tenduphaving toreadthewhole questionin
fulltwice.Youshoulddothisinanactiveway– seeExamsuccess skill1:
Managing Information.
Step3 Readtherequirementagain
Readtherequirement
againtoremind yourself
oftheexactrequirement
before
selecting
youranswer.Thiswillcapture
anymisinterpretation
of
therequirements
andshouldbecome a habitinyourapproach.
3 Examsuccessskill3
Answerplanning:
Priorities,
structure
andlogic
Answerplanning
isa skillthatyouwillneedwhenyoustudyhigher
levelexams
suchasPMor
G APM.Itisnotquiteasrelevantforthestyleofquestion
inFMA/MA. H

4 Examsuccessskill4
Efficientnumericalanalysis
Thisskillaimstomaximise themarks awarded bybeingcarefulinarriving
atyouranswer.You
mustbecareful withcalculationsbecause distractors
(incorrect
answersinMCQs)arebasedon
commonly madeerrors.Forfillintheblankquestions, youmustenter youranswer carefully.
Ifyou
havecalculated theanswer tobe25andyouaccidentally enter52,youwilllosethetwomarks for
thequestion.
Adviceondeveloping Efficientnumerical analysis
Youshould makesureyoucanuseyourcalculator efficiently
(asexplainedinCheckpoint
2)and
practisetakingcarewhenentering fillintheblankanswers.
5 Examsuccessskill5
Effective
writing
andpresentation
Aswithanswer planning,
thisskillismorerelevant
forhigher
levelexams
suchasPMandAPM.

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6 Exam success skill 6
Good timemanagement
Thisskillmeans planningyourtimeacross allthe requirementsso that alltasks havebeen
attempted at the end of the 2 hoursavailableand activelycheckingon timeduringyourexam.
Thisis so that you can flexyourapproach and prioritiserequirementswhich,inyourjudgement,
willgenerate the maximummarksinthe availabletimeremaining.
Adviceon developinggood timemanagement
Theexamis 2 hourslong,whichtranslatesto 1.2minutesper mark.Thereforea 10-mark
requirementshouldbe allocatedabout 12minutesto completeyouranswerbeforeyou moveon to
the nexttask.
Keepan eye on the clock
Aimto attempt allrequirements,but be ready to be ruthlessand moveon ifyouransweris not
goingas planned.Thechallengeformany isstickingto plannedtimings.Beaware thisis difficult
to achieveinthe earlystages of yourstudiesand be ready to let thisskilldevelopovertime.
Questionpractice
Questionpracticeis a corepart of learningnewtopicareas. Whenyou practisequestions,you
shouldfocuson improvingthe Examsuccessskills– personalto yourneeds – by obtaining
feedbackor througha processof self-assessment.

G H

xvii Management
Accounting
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management1
Accounting for

1
Learning objectives
Oncompletion
ofthischapter,
youshould
beableto:

Syllabus
reference
no.
Describe
thepurpose
androleofcostandmanagement
accounting A1(a)
within
anorganisation.
Compareandcontrast
financial
accounting
withcostandmanagement
A1(b)
accounting.
Outline
themanagerial
processes
ofplanning,
decision
making
and A1(c)
control.
Explain
thedifference
between
strategic,
tactical
andoperational A1(d)
G H

planning.
Distinguish
between
‘data’and‘information’. A1(e)
Identify
andexplain
theattributes
ofgoodinformation. A1(f)
Explain
thelimitations
ofmanagement
information
inproviding A1(g)
guidanceformanagerial
decision
making.
1
Exam context
Thecontents
ofthischapter
aremainlytoserveasanintroduction totheManagement
Accounting
exam.
Although
thischapter
isanintroductory
chapter,
itisstillhighlyexaminable.
Youshould
expect
questions
oneverychapter,including
thisone.

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1

G H

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Chapter overview

Accountingformanagement

Purpose
androleofmanagement
accounting Management accounting
vfinancial
accounting

Whatarecost
and Themain
areas
of
management
accounting? management
accounting

Strategic,
tactical
and
operational
planning

Dataandinformation Limitations
ofinformation
fordecision
making

Qualities
ofgood
information

G H

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1 Purpose and role of cost and management accounting

1.1 What are cost and management accounting?

Costaccounting andmanagement accounting
areterms thatareoftenusedinterchangeably. It
isnotcorrect todoso.Costaccounting ispartofmanagement accounting.Costaccounting
provides a bankofdataforthemanagement accountanttouseandisconcerned with:
• Preparing statements
• Costdatacollection
• Applying coststoinventory,
productsandservices.
Management accountingisconcernedwiththeprovision
andtheuseofaccounting information.
Thisinformationisusedbymanagers ofthebusinesstoassistthemwhenmaking decisionsto
achieve theorganisation’s
overall
objective.
Theassumption thatwillusually
bemadeinyour
studiesisthatcompanies wishtomaximise thewealthoftheirshareholders.
Usually,
thiswillbe
achieved bymaximising profit.

Costaccounting:Costaccounting
isthe‘gathering
ofcostinformation
anditsattachment to
KEY costobjects,
theestablishment
ofbudgets,standardcostsandactualcostsofoperations,
TERM processes,
activities
orproducts;
andtheanalysisofvariances,
profitability
orthesocialuseof
funds’.
(CIMAOfficialTerminology)
Management accounting:
Management accounting
isthe‘application
oftheprinciples
of
accountingandfinancialmanagementtocreate,
protect,
preserve
andincrease valueforthe
shareholders
offor-profit
andnot-for-profit
enterprises
inthepublicandprivatesectors’.
(CIMAOfficialTerminology)

1.2 The main areas of management accounting

G Management accounting
canbebroken downintofivemainareas: H

(a) Costing
Whatisthecostofgoodsorservicesprovided?
Weneedtoknowthistoassesstheprofitability
ofproductsorservices,
tohelpsetpricesandto
valueinventory
inthestatement
offinancial
position.
(b) Planning
Planninginvolves
defining
objectives
andassessingfuture
costsandrevenuestosetupa budget.
Planningisessential
inassessing
thepurchasing/production
requirements
ofthebusiness.
It
forcesmanagement tothinkahead.

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The planning process
m
Theassessment Assessthe Assessthe Assessthe Assess sL
tor
stage external organisation future expectations antg
environment eg-
tye
rp
la
nn
in
Theobjective Evaluatecorporate g
stage objectives

Theevaluation Consideralternativeways
stage ofachievingobjectives

Thecorporate Agreea corporateplan

plan S
ho
rt
-t
er
m
Production Resource Product Researchand pl
planning planning planning developmentplanning an
ni
ng

Detailedoperationalplanswhichimplementthecorporateplanona
monthly,quarterlyorannualbasis.Operationalplansinclude
short-termbudgets,standardsandobjectives.
G H

(c) Control
Onceplans havebeen made, the businessmustensurethey are beingfollowedand address any
inefficiencies.Thereare twostages inthe controlprocess.
• Theperformanceof the organisationas set out inthe detailedoperationalplans is compared
withthe actual performanceof the organisationon a regularand continuousbasis.Any
deviationsfromthe plans can then be identifiedand correctiveactiontaken.
• Thecorporate plan is reviewedinthe lightof comparisonsmade and any changes inthe
parameterson whichthe plan was based (suchas newcompetitorsand government
instructions)to assess whetherthe objectivesof the plan can be achieved.Theplan is modified
as necessarybeforeany seriousdamage to the organisation’sfuturesuccessoccurs.
Effectivecontrolis thereforenot practicalwithoutplanning,and planningwithoutcontrolis
pointless.
(d) Decisionmaking
Thereare many decisionsmanagersmay haveto make,such as:
• Whatshouldweproduce?
• Howshouldwefinancethe business?
• Isa projectworthwhile?

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Decisionmakingprocess

Step1 Identifygoals,objectivesorproblems.

Step2 Identifyalternativesolutions/opportunities
whichmightcontributetowardsachievingthem.

Planning
Step3 Collectandanalyserelevantdataabouteachalternative.

Makethechoice/decision.
Statetheexpected
Step4 outcomeandcheckthattheexpectedoutcomeis
inkeepingwiththeoverallgoalsorobjectives.

Step5 Implementthedecision.

Step6 Obtaindataaboutactualresults.

Control
Step7 Compareactualresultswiththeexpected
outcome.Evaluateachievements.

(e) Performanceevaluation
G
Theperformanceof divisionsand employeescan be assessed by comparingtheirperformance H

against budgets or divisionalor individualtargets. Sometimesperformanceevaluationis classed

as part of control(see(c)above).

Exam focus point

TheMA/FMA syllabusspecificallymentionsthe managerialprocessesof planning,controland
decisionmaking.Makesurethat you understandthe meaningof each of these processes.

1.3 Strategic, tactical and operational planning

RNAnthony,a leadingwriteron organisationalcontrol,has suggestedthat the activitiesof
planning,controland decisionmakingshouldnot be separated (Anthony,1965)sinceall
managersmakeplanningand controldecisions.Hehas identifiedthree types of management
activity.
(a) Strategicplanning:‘theprocessof decidingon objectivesof the organisation,on changes in
these objectives,on the resourcesused to attain these objectives,and on the policiesthat are
to governthe acquisition,use and dispositionof these resources’.
Long-termstrategicplanning,also knownas corporateplanning,involvesselectingappropriate
strategiesso as to prepare a longtermplan to attain objectives.Examplesof strategicplanning
includethe selectionof productsand markets,the requiredlevelsof companyprofitabilityand the
purchaseand disposalof subsidiarycompaniesor majornon-currentassets.
(b) Tacticalcontrol(alsoknownas managementcontrol):‘theprocessby whichmanagersassure
that resourcesare obtainedand used effectivelyand efficientlyinthe accomplishmentof the
organisation’sobjectives’.
Resourcesare oftenreferredto as the ‘4Ms’(manpower,materials,machinesand money).

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Efficiencyinthe use of resourcesmeans that optimumoutput is achievedfromthe inputresources
used. Itrelatesto the combinationsof labour,land and capital (forexample,howmuch
productionworkshouldbe automated)and to the productivityof labour,or materialusage.
Effectivenessinthe use of resourcesmeans that the outputs obtainedare inlinewiththe intended
objectivesor targets.
Tacticalplanningthereforerefersto the conversionof the long-termcorporateplan intoa seriesof
short-termplans,usuallycoveringone year, whichrelateto sections,functionsor departments.
Theannual processof short-termplanningshouldbe seen as stages inthe progressivefulfilment
of the corporateplan as each short-termplan steersthe organisationtowardsits long-term
objectives.
(c) Operationalcontrol:‘theprocessof assuringthat specifictasks are carriedout effectively
and efficiently’.
Itis importantto rememberthat operationalplanningoccursinallaspects of an organisation’s
activities,evenwhenthe activitiescannot be schedulednor properlyestimatedbecause they are
non-standardactivities(suchas repairworkand answeringcustomercomplaints).Thescheduling
of unexpectedor ‘adhoc’workmustbe done at short notice,whichis a feature of much
operationalplanning.Inthe repairsdepartment,forexample,routinepreventivemaintenancecan
be scheduled,but breakdownsoccurunexpectedlyand repairworkmustbe scheduledand
controlled‘onthe spot’by a repairsdepartmentsupervisor.
Illustration 1: Planning

Plan1
Seniormanagementdecidethat the companyshouldincreasesales by 5%per annumforat least
fiveyears.
Plan2
Thesales directorand seniorsales managersmakeplans to increasesales by 5%inthe nextyear,
G
withsomeprovisionalplanningforfutureyears. Thisinvolvesplanningdirectsales resources, H

advertising,sales promotionand so on. Salesquotas are assignedto each sales territory.

Plan3
Themanager of a sales territoryspecifiesthe weeklysales targets foreach sales representative.
Required
State whethereach plan is strategic,tactical or operational.

Solution
Plan1:Thisis a strategicplan. Increasingsales by 5%per annumforat least fiveyears is an
overallobjectiveof the organisationand is thereforea strategicplan.
Plan2: Thisis a tactical plan. Thesales directorand seniorsales managersare ensuringthat
resourcesare obtainedand used effectivelyand efficientlyinthe accomplishmentof the
organisation’soverallobjectives.Thisis thereforea tactical plan.
Plan3: Thisisoperationalplanning.Individualsales managersare giventasks whichthey are
expectedto achieveand thisis thereforean operationalplan.

2 Management accounting v financial accounting

Managementaccountingwilluse the same sourcedata as financialaccountingbut there are
someimportantdifferencesto understand.
Managementaccountingsystemsprovideinformationspecificallyforthe use of managerswithin
an organisation.

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Financial
accounting
systemsensure
thattheassetsandliabilities
ofa business
areproperly
accountedforandprovide
information
aboutprofits
andsoonforshareholders andforother
interested
parties.
Financialaccounts Managementaccounts
Financial
accounts detailtheperformance
of Managementaccounts areusedtoaid
anorganisation overa defined
period
andthe management record,
planandcontrolthe
stateofaffairsattheendofthatperiod. organisation’s
activities
andtohelpthe
decision-making
process.
Limited
liability
companies
must,bylaw, There
isnolegalrequirement
toprepare
preparefinancialaccounts. managementaccounts.
Theformatofpublishedfinancial
accounts
is Theformatofmanagementaccounts
is
determinedbylocallaw,byInternational entirely
atmanagement
discretion:
nostrict
AccountingStandardsandInternational rulesgovern
thewaytheyarepreparedor
Financial
ReportingStandards.Inprinciple
the presented.
Eachorganisation
candeviseits
accounts
ofdifferentorganisations
can ownmanagement accounting
systemand
therefore
beeasilycompared. formatofreports.
Financial
accounts concentrate
onthe Management accounts
canfocusonspecific
business
asa whole,aggregating
revenues areasofanorganisation’s
activities.
andcostsfromdifferent
operations,
andare Information
maybeproduced toaida
anendinthemselves. decision
rather
thantobeanendproductofa
decision.
Mostfinancial
accounting
information
isofa Management accounts
incorporate
non-
monetarynature. monetary measures.
Management mayneed
toknow,forexample,
tonsofaluminium
produced,monthly
machine hours,
ormiles
travelled
bysalespeople.
G H

Financial
accounts
present
anessentially Managementaccountsarebothanhistorical
historic
picture
ofpastoperations. record
anda future
planning
tool.

Activity1:Financialv managementaccounting

Whichofthefollowing statements
aboutmanagement accountsaretrue?
(1) Thereisa legalrequirement
toprepare managementaccounts.
(2) Theformat offinancial
accounts
islargelydetermined
bylaw.
(3) Management accountsserveasa future
planning
toolandarenotusedasa historical
record.
 (1)and(2)
 (2)and(3)
 (1)and(3)
 (2)only

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3 Data and information

Data:Dataistherawmaterial fordataprocessing.
Datarelates tofacts,events
and
KEY
TERM
transactions
andsoforth.
Information:
Information
isdatathathasbeenprocessed insomewaytomakeitmeaningful
totheperson whoreceives
it.Informationisanythingthatiscommunicated.
Information
issometimes
referred toasprocessed data.Theterms ‘information’
and‘data’are
oftenusedinterchangeably.
Itisimportant tounderstand
thedifferencebetween thesetwo
terms.
Researcherswhoconduct market researchsurveysmightaskmembers ofthepublicto
completequestionnaires
abouta product ora service.
Thesecompleted questionnaires
are
data;theyareprocessedandanalysed inordertoprepare a reportonthesurvey.This
resulting
reportisinformationandmaybeusedbymanagement fordecision-making
purposes.

Activity2: Externalinformation

Whatexternal
information
maythemanagers
ofa business
need?
Source Informationneeded
Competitors
Customers
Suppliers
Government
G H

3.1 Qualities of good information

Goodinformation
should
berelevant,
complete,
accurate
andclear.Itshouldinspire
confidence,
beappropriately
communicated,
beofmanageable
volume,
timely,anditscostshouldbeless
thanthebenefits
itprovides.
Illustration2: Qualitiesof good information

Abankstatement
provides
a company
withinformation.
Required
Whatarethequalities
ofa bankstatement
whichmakeita goodsource
ofinformation?

Solution
Accurate Inaccurate
figures
would
misleadthecompany
astoitscurrent
bank
balance.
Thismayresult
inthecompanyexceeding
itsoverdraft
facility.
Complete Theinformation
inthebankstatement
willbeusedtoreconcileandidentify
transactions
notincluded
intheaccounts.
Itistherefore
essential
thatall
transactions
arerecorded
thathaveoccurred within
theperiod
ofthebank
statement.
Costbeneficial Acompany willnotbewilling
topayanexcessive
amounttoviewthe
transactions
thata haveoccurredthough
itsaccount.
Thecostsofcollecting

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andpresenting
theinformation
should
therefore
beevaluated.
Usertargeted Thevolumeofinformation
iskepttotheminimumneeded forthecustomer.
Details
thataremeaningful
onlytothebankarelargelyexcluded.
Relevant Thecustomerisnotinterested
inallofthetransactions
thatoccurredforthe
entire
bank.Therefore,
onlyinformationrelating
totheuserisincluded.
Authoritative Theinformation
within
thebankstatement
canbeusedforcontrol
purposes
asthebankisconsidered
a reliable
andauthoritative
source.
Timely Inorder
tobeuseful,theinformation
needstobeprovided
within
a sensible
timeperiod.
Manycompanies havenowswitchedtoonline
bankstatements
astheydon’twanttowaituntiltheendofthemonth
toreceive
information.
Easytouse Itisalwaysinthesameformat.

Thequalities
ofgoodinformation
canberemembered
usingthemnemonic
ACCURATE.

Activity3: Good information

WhichTWOofthefollowing aregoodinformation?
 Monthly salesfigures
forAugustreceivedinNovember
 Asummary provided atthefrontofa report
tosavesenior
manager’sfromhavingtoreadthe
wholedocument
 Adashboard reportsummarisingallthekeyresults
forthelastperiod
foruseatthenext
management meeting
G
 Amonthly report showingthatthechocolatemixing
machine wasadding1%toomuchcocoa H

inthelastperiod

Essentialreading

SeeChapter1Section1oftheEssential
reading,
fordetailonhowinformationcanbeanalysed
usingAnthony’s
hierarchy.
TheEssential
readingisavailable
asanAppendixofthedigitaledition
oftheWorkbook.

4 Limitations of information for decision making

Alldecision
making isconcernedwiththefutureandsotherewillalwaysbesomedegree of
uncertaintysurroundingthepossible
outcomes ofa decision.
Informationfordecisionmaking
shouldtherefore
incorporateuncertainty insomeway.Themethods ofincorporatinguncertainty
areoutsidethescopeofthissyllabus,
butyoushould realise
thatifcostaccountinginformation
doesnottakeaccount ofuncertainty,
itisunsuitable
fordecision
making.Ifanattempt to
incorporate
uncertaintyismade,theinformationshould bemoresuitablefordecisionmaking
but
cannever beriskfree.

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Activity4: Uncertainty

Canyouthinkofanyfactors
whichcontribute
totheuncertainty
anorganisation
mightface?

Solution

G H

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Chapter summary

Accounting for management

Purposeand roleof managementaccounting Managementaccounting

v financialaccounting

Whatarecostandmanagement Themainareasofmanagement • Legalrequirement –YesforFA,

accounting? accounting NoforMA
• Costaccountingprovides
bank • Costing– whatisthecostof • Users– Externalandinternal
ofdataformanagement goods/services
provided? forFA,InternalforMA
accounting • Planning–planningresources • Precision–TrueandfairforFA,
• Management accounting
= requiredandhowtheywillbe Accurate peruserneedsforMA
provision
anduseof used • Rules–GAAP forFA,
accountinginformation • Control
–control overactivities EstablishedtechniquesforMA
• Management accounting
= toensureplanscarriedout • Reporting –PastdataforFA,
assistsmanagementtoachieve • Decisionmaking– using PastandpresentdataforMA
objectives
(egincrease information
tomakeinformed • Scope– Whole organisation
shareholderwealth) decisions forFA,DivisionsetcforMA
• Performanceevaluation– • Frequency –Annual forFA,As
comparing performance requiredforMA
againsttargets/budgets • Format –Companies Actfor
FA,NosetformatforMA
Strategic,
tacticaland
operationalplanning
G
• Strategic
planning,ielongterm H

objectives
• Tactical/management control,
ieresourcesusedeffectively
andefficiently,
4Ms
• Operationalcontrol,
iespecific
tasksimplemented

Data and information Limitationsof information

for decisionmaking

• Data=rawmaterialegfacts, Qualities
ofgoodinformation •Information
shouldincorporate
transactions,
events • ACCURATE uncertainty
• Information
=datathathas –Accurate
beenprocessedsoastobe –Complete
meaningful –Costbeneficial
–Usertargeted
–Relevant
–Authoritative
–Timely
–Easytouse

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Knowledge diagnostic

1.Introduction
tomanagementaccounting
Purpose
istoassistmanagement
inrunning
theirbusiness
toachieve
anoverall
objective.
2. Roleofmanagement
accountant
Includes
costing,
planning,
control,
decision
making
andperformance
evaluation.
3. Managementaccounting
andfinancial
accounting
Financial
accounting
systemsensure
thattheassetsandliabilities
ofa business
areproperly
accounted
for.Management
accounting
systemsprovide
information specifically
formanagers.
4. Dataandinformation
Information
isdatathathasbeenprocessed
tobemeaningful
totheperson
whoreceives
it.
Qualities
ofgoodinformation:
ACCURATE
5. Limitations
ofinformation
fordecision
making
Information
maynotbeappropriateforfuture
decision
making
because
ofuncertainty.

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Further study guidance

Question practice
Nowtry the followingfromthe Furtherquestionpracticebank (availableinthe digitaleditionof
the Workbook):
SectionAquestions:Q1- Q4

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Activity answers

Activity1:Financialv management accounting

Thecorrectanswer is:(2)only
Statement(1)isincorrect.Limited
liability
companies must,bylaw,prepare financial
accounts.
Theformat ofpublished financial
accounts isdetermined bylaw.Statement (2)istherefore
correct.
Management accounts doserveasa future planning toolbuttheyarealsousefulasa historical
recordofperformance. Therefore,statement (3)isincorrect.

Activity2: Externalinformation

Source Informationneeded
Competitors Prices,
product
specifications,
markets
Customers Needs
andwants
ofproduct,
priceprepared
topay
Suppliers Products,
prices,
quality
ofsupplies,
financial
position,
delivery
time
Government Taxrates,minimum
wageandotherlegislation

Activity3: Goodinformation
Thecorrect answersare:
G
• Asummary provided
atthefrontofa report
tosavesenior
manager’sfromhavingtoread H

thewhole document
• Adashboard report
summarisingallthekeyresults
forthelastperiod
foruseatthenext
management meeting
Monthly salesfigures
forAugust,
receivedinNovember,
aretoolateandtherefore
nottimely.
A
monthly reportshowingthatthemixingmachinewasadding1%toomuchcocoainthelastperiod
isnotcomplete. Management wouldneedtoknowhowthiscompared toothermonths
and
whether therewasa tolerance
level.

Activity4: Uncertainty
Herearea fewsuggestions.Youprobably
thought
ofothers.
• Theactions ofcompetitors
• Inflation
• Interest
ratechanges
• Newgovernment legislation
• Possibleshortagesofmaterial
orlabour
• Possibleindustrial
disputes

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2
Data and presenting

information

2
Learning objectives
On completionof thischapter, you shouldbe able to:
Syllabus
referenceno.
Describethe three maindata sources:machine/sensor,transactionaland A2(a)
human/social.
Describesourcesof informationfromwithinand outsidethe organisation A2(b)
(includinggovernmentstatistics,financialpress,professionalor trade
associations,quotationsand pricelists).
Explainthe uses and limitationsof publishedinformation/data(including A2(c)
G
informationfromthe internet). H

Describethe impactof generaleconomicenvironmenton costs/revenues. A2(d)

Preparewrittenreportsrepresentingmanagementinformationinsuitable A4(a)
formatsaccordingto purpose.
Presentinformationusingtables, charts and graphs (bar charts, linegraphs, A4(b)
piecharts and scatter graphs).
Interpretinformation(includingthe abovetables, charts and graphs)presented A4(c)
inmanagementreports.
Producereportshighlightingkeyareas formanagementattentionand F4(g)
recommendationsforimprovement.
Explainsamplingtechniques(random,systematic,stratified,multistage,cluster B1(a)
and quota).
Choosean appropriatesamplingmethodina specificsituation. B1(b)
Describethe twotypes of data: categorical(nominaland ordinal)and B3(d)
numerical(continuousand discrete).
Explainthe roleand featuresof a computerspreadsheetsystem. B4(a)
Identifyapplicationsforcomputerspreadsheetsand theiruse incost and B4(b)
managementaccounting.
Producereportshighlightingkeyareas formanagementattentionand F4(g)
recommendationsforimprovement.
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Exam context

Aswellascollecting
information
wealsoneedtoconsiderhowbesttopresentthatinformation
to
users.
Youshould expect questions
inSection
A oftheexamonthesetopics.

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2
Chapter overview

Dataandpresentinginformation

Sources
ofdataTypes
ofdata

Internal
sources
ofdata

External
sources
ofdata

Impactofthegeneral
economic Random Nonrandom
environment
oncosts/revenues sampling sampling

Random
sampling Quota
sampling

Quasi
random
sampling Cluster
sampling

Systematic
sampling
G H

Stratified
sampling

Multistage
sampling

Presenting
information Spreadsheets

Writing
areport Features
andfunctions

Tables
anddiagrams Preparing
formulae

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1 Types of data

InChapter 1wedefineddata as the rawmaterialfordata processing.Data relatesto facts,

eventsand transactionsand so forthand can be classifiedinthe followingways:

Primarydata: Primarydata is data collectedspecificallyfora particularpurpose.

KEY
TERM Secondarydata: Secondarydata is data whichhas already been collectedelsewhere,for
someotherpurpose,but can stillbe used or adapted forthe surveybeingconducted.
Numericaldata: Asthe name suggests,numericaldata is data that is expressedinnumbers.It
can be discreteor continuous.
Discretedata: Discretedata is data whichcan onlytake on a finiteor countablenumberof
valueswithina givenrange (egmonthof birth).
Continuousdata: Continuousdata is data that can take on any value.Itis measuredrather
than counted(egweight).
Categoricaldata: Categoricaldata is data that is descriptiverather than numeric.For
example,age, educationallevel,eye colour,satisfactionlevels,qualityratings.Itcan be
nominalor ordinal.
Nominaldata: Nominaldata can be thoughtof as a name or a labeland has no set order.You
can countnominaldata but you can’torderor measureit. Forexample,eye colour.
Ordinaldata: Ordinaldata has a set orderor scale.Forexample,levelsof satisfactiondata,
collectedon a scale of one to ten.
Sampledata: Sampledata is data arisingas a resultof investigatinga sample.Asampleis a
selectionfromthe population.
Populationdata: Populationdata is data arisingas a resultof investigatingthe population.A
populationis the groupof peopleor objectsof interestto the data collector.
G H

Data

Numerical Categorical
(expressedinnumbers) (descriptive)

Discrete Continuous Nominal Ordinal

(countablenumber) (anyvalue) (nameorlabel) (setorderorscale)

Activity 1: Primary data

Whatare the keyadvantages and disadvantagesof usingprimarydata?

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Solution

2 Sources of data

Machine/sensordata:Thisisdatathatcomes fromtheoutputofdevicesthatdetectinput
KEY
TERM fromtheir
s urroundings.
G
Transactional
data:Thisisdatathatcomes fromthetransactions
ofanorganisation. H

Human/socialdata:Thisisdatafromhumans andisoftennon-numerical.
Socialdata
sometimesincludes
dataaboutthesocialmedia usersuchastheirlocation.
Human/social
datacanbemoredifficult fordataanalysis
software
tohandle.

Examples
include
thefollowing:
Source Examples
Machine/sensor • Wearablessuchasfitness
trackers
• Smartphones
• Temperature
sensors
• Distance
egparkingsensors
• Touchsensors
inelectronic
devices
• Location
tracking
sensors
• Gasexposuredetectors
Transactional • Salesorders
• Purchaseorders
• Returns
Human/social • Customerqueries
• Handwrittenletters
• Focusgroupfeedback
• Socialmedia
posts

2:Dataandpresenting
information
21
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 q
Real life example
Supermarkets
thatoffera delivery
service
oftenhavelocation
tracking
sensors
inthelorries.
They
canbeusedtotrackdelivery
statusandcheckwhethershoppinghasbeendelivered
ontime.

Information
maybeobtained
fromeither
aninternal
source
orfromanexternal
source.
2.1 Internal sources of information
These
include:
financial
accounting
records,
payroll
andhumanresourcesinformation,
production
information,
timesheets,
published
accounts
andhistorical
records.
2.2 External sources of information
Theseinclude:
marketresearch,
interviews,
postalquestionnaires
(primary
external
data),data
fromgovernments
suchasstatistics
andindices,banks,
newspapers,
tradejournals,
reference
manuals,consultancies,
theinternet,
libraries,
adviceandinformation
bureaux(secondary
external
data).
Source Detail
Governments Officialstatistics
aresupplied
bymanygovernments. In
Britain,
officialstatistics
aresuppliedbytheOfficefor
National Statistics
(ONS).Statistics
published by
government departmentsmayinclude retailprices,
employment figures,population
data.
Banks Dataonbanks,
themoney
supply,
government
borrowing.
Trade
journals Dataonindustry
averages,
competitors’
products,
developments
intheindustry.
G H

Financial
newspapers Detailed
business
data.EgFinancial
Times,
WallStreet
Journal,Singapore
Business
Times,
Nikkei
Weekly.

2.2.1 Theinternetas a sourceofinformation

• Theinternet
isa globalnetwork connecting millionsofcomputers,
allowing
a computer witha
telecommunications
linktosendandreceive informationtoandfromanyothersuitably
equippedcomputer.
• Awebsiteisa collection
ofimages andtextthatprovide informationwhichmaybeviewed on
theWorldWideWeb.Mostorganisations nowhavea website andmanyareabletoprocess
transactions
(known aselectroniccommerce ore-commerce).
• Information
ontheinternet itisnotnecessarilygoodinformation,justbecauseitis‘published’.
Anybodycanputinformation ontheinternet.Thereliability
andreputationoftheprovider is
important,
egtheFinancial Timessite,FT.com,isa respected
sourceoffinancial
information.

3 Impact of the general economic environment on

costs/revenues

Thegeneral
economic
environment
willaffectthecostsandrevenues
ofa business.
Illustration1:Theeconomicenvironment

Consider
anaccountancy
training
business
andstatehowitmightbeaffected
bya recession
(ie
thegeneral
economic
environment).

22 Management
Accounting
(FMA/MA)
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