Management Accounting – M1 – Key Contents
1. Distinction between Financial and Management Accounting
Financial Accounting
Legal Requirements for companies
Requirements depending on type, taxation
Scope & Focus Describes the whole business at
certain moments in time
Regulation & Generally accepted accounting
Methodology principles (GAAP) and other
standards ensure objectivity,
uniformity, consistency and allow
for inter-company and historical
comparisons
Time Describes the past, external
analysts use it for future decisions
Reporting Detailed set of accounts published
annually, quarterly for stock
exchange listed companies
Distinction between Financial and Managerial Accounting
Financial Accounting
Primary Users External – investors, creditors, and
government authorities
Purpose of Help investors and creditors make
Information investment and credit decisions
Focus and time Relevance and reliability of the
dimension of information and focus on the past
the information – example: 2013 actual
performance reported in 2014
Rules and Required to follow GAAP. Public
restrictions companies are required to be
audited by an independent CPA
Scope of Summary reports primarily on the
information company as a whole, usually on a
quarterly or annual basis
Behavioral Concern about adequacy of
disclosures; behavioral implications employee behavior
are secondary
Management Accounting
Entirely optional, only quality counts
Goal: useful info + benefits > cost
Focuses on specific, small parts of the
organization, e.g. products, business
units, departments etc.
Only the usefulness of information for
decision making, planning and control
counts; subjectivity is inherent, MA
depends on situation and on purpose
of the information gathered,
computed, and reported for
management
Concerned as well with the past as
with future events (internal decisions)
At least monthly, depending on use
by management even daily or
“realtime” (Management Cockpits ..)
Managerial Accounting
Internal – the company’s managers
Help managers plan and control
operations
Relevance of the information and
focus on the future – example: 2014
budget prepared in 2013
Not required to follow GAAP
Detailed reports on parts of the
company (products, departments,
territories), often on a daily or weekly
basis
Concern about how reports will affect
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 Management Accounting – M1 – Key Contents
2. The Management Control Cycle

Planning of economic
results = goal setting

Executing activities to
achieve economic goals

Apply measures to Apply measures to

improve execution re-adjust plan/goals
Steering while monitoring
according to plan/goals with respect to new
actual results, operational
set knowledge
and financial

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Planning of economic
results = goal setting
Other information
sources