CIMA fundamentals of management accounting

Fundamentals of Management Accounting Certificate level | Subject BA2 CIMA official revision cards FUNDAMENTALS OF MANAGEMENT ACCOUNTING Published by: Kaplan Publishing UK Unit The Business Centre, Molly Millars Lane, Wokingham, Berkshire RG41 2QZ Copyright © 2018 Kaplan Financial Limited All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Acknowledgements The CIMA Publishing trademark is reproduced with kind permission of CIMA Notice The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties Please consult your appropriate professional adviser as necessary Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials 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 overview fundamentals of management accounting RevisionCards FUNDAMENTALS OF MANAGEMENT ACCOUNTING Make or buy decisions Cost-VolumeProfit analysis Investment appraisal Limiting factor decisions The context of management accounting Risk Decision making Integrated accounting systems Presenting management information Classification of costs Fundamentals of management accounting Planning and control Budgeting Costing systems 10 Standard costing Performance measurement Costing Overhead analysis Cost definitions Relevant cost Marginal and absorption costing the context of management accounting fundamentals of management accounting RevisionCards FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting Position in organisation The Global Management Account Principles Need for professional body Role of management accountant Compared to financial accountant ca$h CIMA/IFAC definitions The context of management accounting Purpose of management accounting Planning Controlling CHOICES CIMA Decision making CHOICES CHOICES Decision making levels Role of CIMA Information Characteristics 12 FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting 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 Stewardship build trust 13 Influence Trust Relevant Value Information is relevant The impact on value is analysed FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting Management accounting 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.” Management accounting •• For internal use •• no legal requirement •• no set formats or rules •• main purposes are planning, controlling and decision making 14 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 Management accounting Planning Establishing the objectives of an organisation and formulating strategies that can be used to achieve those objectives Management Accounting Decision making involves considering the information that has been provided and using it to make informed decisions 15 Decision making Controlling Once planning has been carried out, targets can be set This allows for the evaluation of performance FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting Information Characteristics of information at different levels: Strategic Operational A CCURATE C OST BENEFICIAL C OMPLETE •• forecast •• historic •• long term •• short term U NDERSTANDABLE •• subjective •• objective R ELEVANT •• wide •• narrow •• summarised •• detailed A UTHORITATIVE T IMELY E ASY TO USE 16 FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting The role of the management accountant Roles include: •• formulating strategic plans Enhancing performance •• acquisition of finance •• deriving performance and benchmarks •• improving business systems Reporting performance •• 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 17 FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting The finance function Dedicated business partner 18 The finance function Shared Service Centre (SSC) Business Process Outsourcing (BPO) Part of business Cost saving Cost saving Strong business relationships Best practice Specialists Detailed knowledge Consistency Releases capacity FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting CIMA Chartered Institute of Management Accountants INTEGRITY •• established 1919 •• world’s largest professional body of management accountants •• committed to upholding the highest ethical and professional standards •• globally recognised as CGMA 19 PROFESSIONAL BEHAVIOUR OBJECTIVITY Fundamental principles PROFESSIONAL COMPETENCE AND DUE CARE CONFIDENTIALITY FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting Be inspired – make your own notes: 20 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 21 •• 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 22 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 ... of management accounting fundamentals of management accounting RevisionCards FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting Position in organisation The Global Management. .. analysed FUNDAMENTALS OF MANAGEMENT ACCOUNTING – The context of management accounting Management accounting Management accounting: “the application of the principles of accounting and financial management. .. Britain FUNDAMENTALS OF MANAGEMENT ACCOUNTING Contents •• The context of management accounting •• Costing •• Planning and control •• Decision making overview fundamentals of management accounting