LU3: Management Accounting in the Public Sector

Vocabulary flashcards covering key terms and concepts from the lecture on management accounting in the public sector.

Public Sector Accounting

The field of accounting focused on recording, reporting, and analyzing financial information for government and other public entities.

Management Accounting & Control

The process of providing managers with financial and non-financial information for planning, controlling, and decision-making within an organization.

Traditional Objectives of Public-Sector Accounting

Aimed to provide financial summaries, ensure legal compliance, and enable comparisons with the budget.

Modern Objectives of Public-Sector Accounting

Emphasize informing stakeholders, aiding management decisions, identifying assets and liabilities, facilitating democratic transparency, and supporting the next budget cycle.

Planning (Public Sector Context)

Using accounting information to decide which activities to undertake and what resources will be required.

Controlling (Public Sector Context)

Using accounting information to measure how effectively and efficiently an organization meets its objectives.

Value for Money (3 Es)

A public-sector criterion focusing on Economy (minimizing cost), Efficiency (optimal use of resources), and Effectiveness (achieving intended outcomes).

Contextual Variables Affecting Public-Sector MA

Distribution of political power, legal tradition, professional influence, and user orientation, all of which shape accounting practices.

Activity-Based Costing (ABC)

A costing methodology that assigns costs to activities based on their use of resources, serving as the conceptual basis for the Micro Accounting System.

Micro Accounting System (Sistem Perakaunan Mikro – SPM)

Malaysia’s ABC-based guideline for collecting, processing, and preparing detailed cost information in the public sector.

Objectives of SPM (i.e MAS micro acct system)

Facilitate cost data collection and processing, provide flexible and reliable cost information, and optimize resource use.

Implementation Strategies of SPM

Involve establishing implementation machinery, training, phased approaches, follow-up measures, and computerised systems.

How gov can convince investors to invest?

1. Sound financial management and transparency: Timely financial reporting, clear budget process, low fiscal deficit meaning spend dengan berhemah

2. Stable economic policy: Predictable tax rates, inflation under control, manageable debt levels.

3. Good credit rating (e.g. Moody’s, S&P) are seen as low-risk borrowers

4. Proper management of national debt reassures investors.