Module 1: The Nature and Purpose of Management Accounting

Management Accounting

An information system that produces information required by managers to manage resources and create value for customers and shareholders.

Cost Accounting

A part of management accounting concerned with collecting cost data and preparing estimates of new/current products and services.

Financial Accounting Focus

External reporting to shareholders, creditors, and regulatory bodies (e.g., ATO, ASIC).

Anthony Hierarchy

The division of management activities into three levels: Strategic Planning, Management Control, and Operational Control.

Strategic Information

Summarised high-level data from internal and external sources used by senior management for long-term planning.

Tactical Information

Internally generated, routine data used by middle management to decide how to employ resources.

Operational Information

Highly detailed, task-specific data relating to the immediate term, used by front-line supervisors.

Data

The raw material for processing, relating to facts, events, and transactions.

Information

Data that has been processed so as to be meaningful to the person who receives it.

Qualities of Good Information

Relevant, complete, accurate, clear, confidence-inspiring, appropriately communicated, manageable volume, timely, and cost-effective.

Vision

A succinct statement of an organization’s future aspirations.

Mission Statement

A statement setting out an organization’s fundamental purpose.

Objective

The specific aim or goal of an organization.

Strategy

A possible course of action that enables an organization to achieve its objectives.

Management Control System

A system that measures and corrects performance to ensure organizational objectives are met.