MANAGEMENT ACCOUNTING (also called Managerial Accounting or Internal Accounting) – a

field of accounting that provides economic and financial information for internal users,
particularly the managers or decision-makers in an organization.

MANAGEMENT FUNCTIONS AND THE NEED FOR MANAGEMENT ACCOUNTING INFORMATION

1. PLANNING – involves:
a. setting of immediate, as well as long-range goals for the organization;
b. predicting future conditions that are expected to prevail;
c. considering the different means or strategies by which the goals set may be achieved;
and
d. deciding which of the strategies should be used to attain such goals.

2. DIRECTING AND MOTIVATING – involves overseeing the day-to-day activities, seeing to it

that the organization is functioning smoothly and the members of the organization are
mobilized to carry out plans.

3. CONTROLLING – involves checking the performance of activities against the plan or

standards set and deciding what corrective actions to take should there be any deviation
between the actual and planned/standard performance.
- All the aforementioned management functions involve decision-making: In
performing the decision-making function, managers need information. Such
information is provided by management accountants.
ACTIVITIES INVOLVED IN MANAGEMENT ACCOUNTING
1. Determining accumulating, and explaining costs – both manufacturing and non-
manufacturing costs
2. Computing or determining product cost/ service cost
3. Determining cost behavior
4. Providing assistance to management in profit planning/budgeting
5. Accumulating and presenting data which may be used by managers in decision-making
6. Providing bases for cost control with the use of standard costs and other planned
objectives
7. Assisting managers in developing the company's prices both for external and internal
transactions

APPLICATION OF MANAGEMENT ACCOUNTING

1. BUSINESS - managerial accounting provides the economic information needed by the
businesses' managers so they can attain their profit/other economic goals
2. NON-PROFIT ORGANIZATIONS - these organizations likewise need the economic
information provided by management accountants in attaining their organization's
objectives

PRINCIPLES GOVERNING THE DESIGN OF MANAGEMENT ACCOUNTING SYSTEMS

 1. The system should help to establish the decision-making authority over the organization's
assets.
2. The information generated by the system should support planning and decision-making.
3. The reports should provide a means for performance monitoring and evaluation.

DISTINCTIONS AMONG MANAGEMENT ACCOUNTING, COST ACCOUNTING, AND FINANCIAL

ACCOUNTING
The accounting system is part of the organization's management information system (MIS). The
cost accounting system, which accumulates data about the costs of producing goods and services,
is part of the organization's overall accounting system. It accumulates cost information for both
management accounting and financial accounting.

MANAGEMENT ACCOUNTING VS. FINANCIAL ACCOUNTING

MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING
USERS OF REPORT Internal users: officers and External users: stockholders;
managers creditors, concerned
government agencies
PURPOSE To provide internal users with To provide external users with
information that may be used information about the
by managers in carrying out organization's financial
the position and results of
functions of planning operations.
controlling, decision-making,
and performance evaluation.
TYPES OF REPORTS Different types of reports, Primarily financial statements
such as budgets, financial and the accompanying notes
projections, cost analyses, to such statements.
etc., depending on the
specific needs of
management.
BASIS OF REPORTS Reports are based on a Reports are based almost
combination of historical, exclusively on historical data
estimated, and projected
data.
STANDARDS OF In preparing reports, the Reports are prepared in
PRESENTATION management of a company accordance with generally
can set rules to produce accepted accounting
information most relevant to principles and other
its specific needs pronouncements of
authoritative accounting
bodies
REPORTING ENTITY Focus of reports is on the Financial reports relate to
company's value chain, such the business as a whole.
 as a business segment,
product-line, supplier or
customer.
PERIOD COVERED Reports may cover any Reports usually cover a year,
time period - year, quarter, quarter, or month.
month, week, day, etc.
Reports may be required as
frequently as needed.

CONTROLLER: The Chief Management Accountant

CONTROLLER – the chief management accounting executive of a organization who is mainly

responsible for the accounting aspects of management planning and control.

FUNCTIONS OF THE CONTROLLER

1. PLANNING FOR CONTROL – to establish, coordinate, and administer, as an integral part
of management, an adequate plan for the control of operations.
2. REPORTING AND INTERPRETING – to compare performance with operating plans and
standards and to report and interpret results of operations to the concerned users of such
reports.
3. EVALUATING AND CONSULTING – to consult with all levels of management responsible
for policy or action concerning any phase of the operation of the business as it relates to
the attainment of objectives and effectiveness of policies, organizational structures, and
procedures.
4. TAX ADMINISTRATION – to establish and administer tax policies and procedures.
5. GOVERNMENT REPORTING – to supervise or coordinate the preparation of reports to
government agencies.
6. PROTECTION OF ASSETS – to assure protection for the assets of business through internal
control, internal auditing, and assuring proper insurance coverage.
7. ECONOMIC APPRAISAL – to continuously appraise economic and social forces and
government influences and to interpret their effect upon the business.

DISTINCTIONS BETWEEN CONTROLLERSHIP AND TREASURERSHIP

CONTROLLERSHIP TREASURERSHIP
1. Planning and control 1. Provision of capital
2. Reporting and interpreting 2. Investor relations
3. Evaluating and consulting 3. Short-term financing
4. Tax administration 4. Banking and custody
5. Government reporting 5. Credit and collections
6. Protection of assets 6. Investments
7. Economic appraisal 7. Insurance

CERTIFICATION AVAILABLE TO MANAGEMENT ACCOUNTANTS

THE CMA PROGRAM OR CERTIFICATE IN MANAGEMENT ACCOUNTING

The CMA Program or Certificate in Management Accounting is a program for management

accountants designed to recognize their unique qualifications, high standards, and
professional expertise in the field of management accounting.

Qualified management accountants earn the designation Certified Management

Accountant (CMA), the internal accountant's counterpart to the Certified Public
Accountants (CPA).

THE ORGANIZATION INVOLVED

In the United States, the CMA Program is conducted by the Institute of Management
Accountants (IMA), the largest US Professional organization of accountants. In the
Philippines, the Philippine Association of Management Accountants (PAMA) conducts the
Certificate in Management Accounting (CMA) program through its continuing education
arm, the Philippine Institute of Management Accountants (PIMA). The PAMA is affiliated
with the Institute of Management Accountants or IMA.

The PAMA was founded primarily to provide its members with professional and
educational activities that enhance their knowledge of management accounting principles
and methods.

OBJECTIVES OF THE PROGRAM

The CMA has four objectives, consistent with the mission of the Philippine Association of
Management Accountants (PAMA) to "promote management accounting, enhance the
capability of its members and foster high standards of professionalism.”
• To establish Management Accounting as a recognized profession in the field of
business
• To encourage stricter and high quality educational standards in educational standards
in Management Accounting
• To provide objective means for measuring the Management Accountant's knowledge
and competence
• To encourage continued professional growth

REQUIREMENTS TO BECOME A CMA

To qualify for a Certificate in Management Accounting the interested applicant must fulfill
the following requirements:
a. File an application for admission with the Institute of Certified Management
Accountants thru PAMA and register for the CMA examinations
b. Be a member of the IMA thru PAMA
c. Pass all four (4) parts of the CMA examinations:
 Part 1 – economics. finance, management
Part 2 – financial accounting and reporting
Part 3 – management reporting, analysis, and behavioral issues
Part 4 – decision analysis and information systems

4. Management accounting experience requirements

• Two continuous years of professional experience in management accounting and/or
financial management
• This requirement may be completed prior to or within seven years of passing the
examination
• Teachers can meet this requirement if majority of their load is in accounting and
corporate financial management courses above the principles level
• Professional experience can be gained in full-time employment. However. continuous
part-time positions of 20 hours per week meeting the definition of qualified
experience will count toward this requirement at a rate of one year of experience for
every two years of part-time employment

Qualifying Experience Consists of the Following:

• Positions requiring judgments regularly made employing the principles of
management accounting and financial management
• Such employment includes financial analysis, budget preparation, management
information systems analysis, financial management, management accounting,
auditing in government, finance or industry; management consulting; auditing in
public accounting; research, teaching or consulting related to management.

Non-Qualifying Experience Consists of the Following:

• Employment requiring the occasional application of management accounting
principles such as in computer operations, sales and marketing, manufacturing,
engineering, personnel, and general management will not satisfy this requirement
• Internships and trainee, clerical, or non-technical positions do not provide appropriate
experience to fulfill this requirement.

5. Comply with the Standards of Ethical Conduct for Management Accountants

Upon receiving the certificate, the successful CMA professional is expected to maintain high
standards of professionalism and excellence in the field by meeting the following:
• Satisfaction of the Continuing Education Requirement
• Complying with the Standards of Ethical Conduct
• Maintaining membership with IMA through PAMA

While the CMA requirements are stiff, these are demanded by the high regard for CMA
professionals’ uniformity accorded in Europe, the United States, and throughout the world. This
same level of professional excellence is sought to be developed by the CMA program in the
Philippines.