F2 ACCA Lesson1

Session Objectives
Topic 1
Describe the purpose and role of cost and
management accounting within an organisation’s
The Nature and Purpose of management information system
Management Accounting Compare and contrast financial accounting with
cost and management accounting.
Distinguish between data and information
Identify and explain the attributes of good
information
© www.accountingclassroom.com A Resource for ACCA Exam Preparation © www.accountingclassroom.com A Resource for ACCA Exam Preparation
Session Objectives Role of Accountants
Outline the managerial processes of planning,

decision making and control
Financial accounting
Explain the difference between strategic, tactical Management and Cost accounting
and operational planning. Non-financial information
Distinguish between cost, profit, investment and
revenue centres.
Explain and illustrate the concepts of cost objects,
cost units and cost centres
Financial Accounting
Accounting
The classification and recording of

monetary transactions of an entity in
accordance with established concepts,
principles, accounting standards and
Cost and preparation of the final accounts
Financial Management
Accounting
Insufficiency of Financial
Financial Accounting
Accounting Information: Example
Much of the information is financial Profit statement does not answer

Maintain ledger systems of accounting questions such as:
records Which product sells best?
Financial accounts are a source of How much profit do we earn from each
product?
management information but are
Do we make a loss with any of our products?
insufficient for the management
Are costs higher than expected and if so in
which area?
………and many more
Management Accounting Management Accounting
Application of principles of accounting This involves participation of

and financial management to create, management to ensure proper:
protect, increase value so as to deliver
that value to the stakeholder Strategic planning
Budgeting / Profit planning
Financial management
Financial control
Audit
What is Cost Accounting What is Cost Accounting
A system of recording data and Cost accounting is a part of

producing information about costs, for management accounting
the products produced by the Management accounting includes cost
organisation and or the services it accounting and extends to both financial
provides. as well as non-financial information
It is also used to establish costs for Cost accounting is historical while
particular activities or responsibility management accounting is forward
centres. looking
>>>
Management Accountant vs.
Financial Accountant Functions of Management
Basis Management Accountant Financial Accountant
Information User Internal Use External Use
Purpose Aid planning, controlling, Record financial

decision-making performance in a
specific period
Legal requirements None Limited companies
must produce financial
statements
Formats Depends on the Prescribed
management
Nature Financial and non-financial Mostly financial
Time period Historical and forward- Historical

looking
Why Does Management Need Information for Planning, Control

Information and Decision Making
To make plans
Monitor performance
Planning
Take one-off decisions
Decision Controlling
Making
Information vs. Data Qualities of Good Information
Gathered Understandable
And Processed Relevant and purposeful
Stored
Timely
Facts Data Information
Accurate
Complete but not excessive
Data has no clear meaning until it is Communicated to the right person
processed, analysed and organised into Value of information > Cost of producing it
information Communicated by appropriate channel
Value of Information Assessing Value of

Information
Value of information helps in:
Who uses the information?
Reducing unnecessary costs
Adopting better marketing strategies What is it used for?
Better analysis of cost drivers How often is it used?
Optimising techniques How often it is provided but not used?
What is achieved by its use?
Cost of Information Planning Hierarchy
Cost of gathering data Strategic Planning

Cost of processing data And Control
Cost of storing data and information Tactical Planning

Cost of providing information And Control
Operational Planning
And Control
Examples: Strategic Planning

A process
What is Strategic
Planning
Of deciding on objectives of
the organisation Selection of products
On changes in these Markets to sell the product in
objectives
Required level of company profitability
On resources used to attain
these objectives Purchase and disposal of companies
Policies that govern the Purchase and disposal of major fixed
acquisition, use and assets
disposition of these resources
Total manning needs
Raising new funds
Management Control Operational Control
A process by which the Also called operational

managers assure that planning
resources are obtained ad
Process of assuring that
used effectively and efficiently
in the accomplishment of the specific tasks are carried
organisation’s objectives. out effectively and
efficiently
Also called Tactical planning Example: allocation of
particular staff to particular
Examples: setting budgets for tasks, handling customer
sales, production etc. complaints etc.
Type of Information Requirements Sources of Information
Inside and outside the

organisation
Planning Structured information
Information Strategic
systems
Non-structured ways
Tactical
Control
Control
Operational
Information
Structured Internal Information
System
Responsibility Accounting
Gathers data within the organisation and A system of providing financial

then processes the data to provide information to management, where the
reports to management structure of the reporting system is
All businesses have a structured system based on identifying individual parts of a
for financial accounting and financial business which are the responsibility of a
reporting single manager
Many businesses also have cost
accounting system or management
accounting system
Cost Cost Object
A cost may be defined as a sacrifice or Anything for which a separate measurement

giving up of resources for a particular of costs is desired.
purpose. Cost of making a product
Costs are frequently measured by the Cost of service
monetary units that must be paid for Cost of department
goods and services. Cost of Sales Region
Costs are different from expense
Cost Driver Cost Units
A unit of product or service in relation to

Any factor whose change causes a change in which costs are ascertained
the total cost of a related cost object For an accountancy firm the cost unit might be
the hours of work provided to client
Hierarchy of Responsibility Centres Impact of Responsibility

Accounting On Management
Investment Centres Information
Investment
Centre A responsibility centre affects the nature
Manager of management reporting. Managers
need enough information to control their
Profit centres
Profit Centres responsibility centres.
managers
Cost Revenue
Cost Revenue
centres centres
Centres Centres
managers
managers
Presenting Information to
Management Principles of Writing Reports
Conciseness
Structure
Style
Presentation
Graphical
Sample Exam Question Answer
Which of the following is correct about C

data and information? Data can be discrete or continuous. A set of
data is said to be discrete if the values
A. Information collected from external sources belonging to it are distinct and separate.
cannot be classified as data
B. Strategic information deals with formulation
of short-term plans only
C. Data can be discrete or continuous
D. Non-financial data is classified as processed
information
Sample Exam Question Answer
Mark is a profit centre manager. What is C
he responsible for in his segment of the

A profit centre manager is responsible for both costs and
organisation? revenues of his centre.
A. Costs only
B. Revenues only
C. Both costs and revenues
D. Cost, revenue as well as investment

F2 ACCA Lesson1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

F2 ACCA Lesson1

Uploaded by

Copyright:

Available Formats

Session Objectives

Session Objectives Role of Accountants

Outline the managerial processes of planning,

The classification and recording of

Much of the information is financial Profit statement does not answer

Application of principles of accounting This involves participation of

What is Cost Accounting What is Cost Accounting

A system of recording data and Cost accounting is a part of

Information User Internal Use External Use

Purpose Aid planning, controlling, Record financial

Time period Historical and forward- Historical

Why Does Management Need Information for Planning, Control

Value of Information Assessing Value of

Cost of gathering data Strategic Planning

Cost of storing data and information Tactical Planning

Examples: Strategic Planning

A process by which the Also called operational

Type of Information Requirements Sources of Information

Inside and outside the

Gathers data within the organisation and A system of providing financial

Cost Cost Object

A cost may be defined as a sacrifice or Anything for which a separate measurement

A unit of product or service in relation to

Hierarchy of Responsibility Centres Impact of Responsibility

Sample Exam Question Answer

Which of the following is correct about C

Mark is a profit centre manager. What is C

he responsible for in his segment of the

You might also like