CIMA fundamentals of management accounting

FUNDAMENTALS OF MANAGEMENT ACCOUNTINGCosting Cost-Volume-Profit analysis Fundamentals of management accounting Overhead analysis Marginal and absorption costing Planning and control Int

Fundamentals of Management Accounting

FUNDAMENTALS OF MANAGEMENT ACCOUNTING

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Unit 2 The Business Centre, Molly Millars Lane,

Wokingham, Berkshire RG41 2QZ

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British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN 978-1-78740-182-2 Printed and bound in Great Britain

FUNDAMENTALS OF MANAGEMENT ACCOUNTING

Contents

• The context of management accounting

• Costing

• Planning and control

• Decision making

fundamentals of management accounting

RevisionCards

FUNDAMENTALS OF MANAGEMENT ACCOUNTING

Costing

Cost-Volume-Profit analysis

Fundamentals of management accounting

Overhead analysis

Marginal and absorption costing Planning and control

Integrated accounting systems

Investment

appraisal

Presenting

management

information

Performance measurement

Budgeting

Standard costing

Make or buy

decisions

Limiting factor

decisions

Relevant cost

Classification

of costs

Cost definitions

The context of management accounting Decision making

Costing

systems

Risk

the context of management

accounting

fundamentals of management accounting

RevisionCards

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

CIMA

Need for

professional body

Role of CIMA

Decision making

Role of management accountant

Controlling

Planning

Purpose of management accounting

The context of management accounting

Position in organisation

Compared to financial accountant

CHOICES

CHOICES CHOICES

ca$h

Characteristics

Decision making levels

Information

CIMA/IFAC definitions

The Global

Management Account

Principles

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Stewardship

build trust

The Global Management Accounting Principles

CIMA, together with the American AICPA, have developed the Global Management Accounting Principles which should be used to guide best practice in management accounting

Communication

provides insight

that is influential

The impact on value is analysed

Information is relevant

Value Trust

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Management accounting

Management accounting

• For internal use

• no legal requirement

• no set formats or rules

• main purposes are planning,

controlling and decision making

Management accounting: “the application of the principles of accounting and

financial management to create, protect, preserve and increase value for the stakeholders of for profit and not-for-profit enterprises in the public and private sectors.”

Financial accounting

• For external use

• required by law

• governed by rules and regulations

• purpose is the production of statutory accounts

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Establishing the objectives of

an organisation and formulating strategies that can be used to achieve those objectives

Decision making

involves considering

the information that

has been provided

and using it to make

informed decisions

Once planning has been carried out, targets can be set This allows for the evaluation of performance

Management accounting

Planning

Decision

Management Accounting

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Information

Characteristics of information at

different levels:

• forecast

• long term

• subjective

• wide

• summarised

• historic

• short term

• objective

• narrow

• detailed

A CCURATE

C OST BENEFICIAL

C OMPLETE

U NDERSTANDABLE

R ELEVANT

A UTHORITATIVE

T IMELY

E ASY TO USE

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

The role of the management accountant Roles include:

• formulating strategic plans

• acquisition of finance

• deriving performance and benchmarks

• improving business systems

• generating, communicating and interpreting financial information

• risk management The role of the management accountant is no longer

simply reporting performance to management – it is

now as a value-adding business partner

Reporting

performance

Enhancing performance

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Dedicated

business partner

The finance function

Shared Service Centre (SSC) Outsourcing (BPO)Business Process Part of business

Strong business

relationships

Detailed

knowledge

Cost saving Best practice Consistency

Cost saving Specialists Releases capacity The finance function

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

INTEGRITY

OBJECTIVITY

PROFESSIONAL BEHAVIOUR

PROFESSIONAL COMPETENCE AND DUE CARE

CONFIDENTIALITY

Fundamental principles

CIMA

Chartered Institute of

Management Accountants

• established 1919

• world’s largest professional

body of management

accountants

• committed to upholding

the highest ethical and

professional standards

• globally recognised as CGMA

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Be inspired – make your own notes:

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Exam tips

Questions in this area will be

narrative

• Know the purpose and definition of

management accounting Be able

to contrast this with the purpose of

financial accounting

• Know the types of decisions made

at various levels in an organisation

• Know the characteristics of

information required at the

different levels and know

the characteristics of good

information

• Know the options for the position

of the management accountant within the organisation and understand the advantages and disadvantages of each option

• Learn the history and purpose of CIMA

• Know the five basic principles of the CIMA code of ethics

• Know the Global Management Accounting Principles

Remember – all parts of the

syllabus are examinable

FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting

Sample exam questions

Which THREE of the following are

characteristics of good information?

(a) Available

(b) Complete

(c) Reliable

(d) Relevant

(e) Correct

(f) Timely

Answer: B, D and F

Which of the following show the three main purposes of management accounting?

(a) Planning, reporting and controlling (b) Reporting, auditing and controlling (c) Decision making, planning and reporting

(d) Planning, controlling and decision making

Answer: D