AE 27 Lesson 1.2
AE 27 Lesson 1.2
MANAGEMENT ACCOUNTING
LESSON 1.2
Management Accounting:
An Overview
Organization Structure and the
Management Accountant
A major function of Management Accountant is that of
tailoring application of the process to the organization
so that the organization’s objectives, short-term or long-
term, are effectively achieved.
Management Accounting is intended to include persons
involved in such functions as Controllership, Treasury,
Financial Analysis, Planning and Budgeting, Cost
Accounting, Internal Audit, Systems, and the General
Accounting.
Management Accountants may have titles as Controller,
Treasurer, Budget Analyst, Cost Analyst and Accountant.
Staff – is usually the accounting function with the
responsibility of providing line managers and other
staff managers with the required specialized services.
Line Authority – is the authority to command action or
give orders to subordinates.
Line Managers – are directly responsible for attaining
the objectives of the business firm as efficiently as
possible.
Staff Authority is the authority to advise but not
command others, it is exercised laterally or upward
Functional Authority is the right to command action,
laterally or downward with regards to a specific
function or specialty.
The Chief Financial Officer and The
Controller
The Chief Financial Officer (CFO), also called as the
Finance Director in many countries, is the executive
responsible for overseeing the financial operations
of an organization.
The responsibilities of the CFO vary among
organizations, but usually include the following:
Controllership – includes providing financial information
for reports to managers and reports to shareholders
and overseeing the overall operations of the accounting
system
Treasury – includes banking and short and long term
financing, investments and management of cash.
Risk Management – includes managing the financial risk
of interest-rate and exchange rate changes and
derivatives management.
Taxation – includes income taxes, sales taxes and
international tax planning
Internal Audit – includes reviewing and analyzing
financial and other records to attest to the integrity of
the organization’s financial reports and to adherence to
its policies and procedures.
The Controller (also called Chief Accounting Officer)
is financial executive responsible for Management
Accounting and Financial Accounting.
Illustrative organizational chart of the CFO and
the corporate controller in an Apparel Company
The Controller as the Top Management
Accountant
Controllership is the practice of the established science of control
which is the process by which management assures that the
resources are procured and utilized according to plans in order to
achieve the company’s objectives.
The Controller provides reports for planning and evaluating
company activities and provides the information needed to make
management decisions.
The Controller also has responsibility for all financial accounting
reports and tax filings with the BIR and other taxing agencies, as
well as coordinating the activities of the firm’s external auditors.
The Controller’s authority is basically staff authority, wherein the
controller’s office gives advice and service to other departments,
but in his own department he has line authority.
A typical Organization Chart Showing the
Functions of the Controller
Basic Functions of Controllership
The Principal functional responsibilities and activities of
controllership may be categorized as follows:
1. Planning
Establish and maintain an integrated plan of operation,
consistent with the company’s goals and objectives.
2. Control
Develop and revise standards against which to measure
performance and provide guidance and assistance to their
members of management in ensuring conformance of actual
results to standards.
3. Reporting
Prepare, analyze and interpret financial results for utilization by
management in the decision- making process.
4. Accounting
Design, establish and maintain general and cost accounting
systems at all company levels, including corporate,
divisional, plant and unit to properly record all financial
transactions in the books of accounts in accordance with
sound accounting principles with adequate internal control.
5. Other Primary Responsibilities
Manage and supervise other functions such as taxes
preparation and filing, so as interface with the respective
taxing authorities and agents. Maintain appropriate
relationships with internal and external auditors.
Supervise Treasury and others.
Qualification of the Controller