a Explain the importance of management accounting to management processes. Explain the evolutionary developments in management accounting. Understand the powers, duties and responsibilities of a controller. Discuss the basic functions of controllership. Ilustrate the planning and controlling cycle. Summarize the basic principles of internal controls. Describe the basic functions of treasurership. Differentiate financial accounting from mana accounting. Apply basic ethical of management accounting. 4 Understand the directions and compelling dynamism in management accounting. gementCHAPTER 2 MANAGEMENT ACCOUNTING ENVIRONMENT 38 Management accounting and its information The evolving landscape of management processes The challenge of delivering goods and services to more than satisfy customers was i and needs hes ipade managers radically creative and innovative in their approaches. This | swsee Naat een rea ar phipsophles and practices compeling profeesionalsin S27 the information business, including management accountants, to provide more aecurte ae vraragarent ‘and precise information. This has paved the shift om traditional management accounting, ‘accounting evolves Services o strategic management accounting series const i es eee a ‘Management accounting evolution ‘The IFAC Handbook 1999 Technical Pronouncements reports the ‘evolution of manage- ‘ment accounting in the last seven decades as follows: ‘Table 2.1. Timeline Evolution of Management Accounting ‘Timeline Focus ‘Techniques Before 1950 ‘Cost determination and ‘Budgeting and cost accounting financial control techniques i 1965 Information for planning and Responsibility accounting and control decision analysis 1985 Reduction of waste in Process analysis and cost business processes ‘management techniques 1995, ‘Creation of value threugh | Driver analysis of customer effective resource use value, shareholder value and organizational innovation 2005 onwards Sustainability and growth [Balanced scorecafd and environmental accounting Managers need relevant and timely information to make reasonable economic decisions ed by the financial accountant, managers mullti-intelligence ‘Aside from traditional information suppli ‘ask for more detailed, exhaustive, and factual information for a appraisal of business operations, Management Accounting, defined ssued a ‘as an integral part of the management 5 1989 and clearly identifiesjmanagement accounting” When objectives are set, specifi Set, specific “plans” rocasarisle| sitainablonealsneeeniiees why, what, who, where, when, how. sc - y Ww much, T) into action to achieve results and resu Stepdaa) ee ve, plans must murposes. S compared ES purposes tana are developed because budgets once ih stad fr coat roeult a igets are estimated costs based on €: aieaie te ae andards, in management accounting, are estimated units produced and sold, pete , costs based on actual units Data cn Actyal and standard costs always have di dai aa pein technically referred to es theliein ‘nego or exceptional, Normal variances are expected and are ATK tke rng CEN expectations. Such variances are monitored and explained by lower pee Exceptional variances are material, unusual, abnormal and are beyond normal expecta Su \dled by top management. This process conforms to the ati of manage “These material, exceptional, variances need quick and precise actions to plug problems and avoid their recurrence. Sample Problem 2.1 - Normal and exceptional variances : P500 million. The management estimated that the + ormal deviation between the plan and the actual is + or 5%, This means that the normal and upper estimates in sales is P525 million (P500 million x 1.05) and the normal and rower estimates in sales is P475 million (P500 million x 95%). Therefore, the normal range: of estimated sales is P475 million to P525 million. Ifthe amount of actual sales falls within — the normal range of estimates, the variance is normal. If the amount of actual sales falls, outside the normal range of estimates, the variance is exceptional. Look at the boxes — below for reinforced understanding: Say, the planned sales of a company is