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cpa foundation management accounting summary notes
management accounting summary notes
management accounting notes
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M1:4 Information and Value Creation 4.2 Types of information
Anthony hierarchy
4.1 Management control systems Author Robert N Anthony (Management Control Systems, 1972) divided management
Management control system activities into three levels:
● A system that measures and corrects the performance of activities of ● strategic planning
subordinates in order to make sure that the objectives of the organisation are ● management control
being met and the plans devised to attain them are being carried out ● operational control
Basic elements of a management control system
● Planning what to do and identifying the desired results.
● Recording the plan which should incorporate standards of efficiency or targets.
● Carrying out the plan and measuring actual results achieved.
● Comparing actual results against the plans.
● Evaluating the comparison, and deciding whether further action is necessary.
● Implementing corrective action where necessary
Strategic Used by senior managers to plan the objectives of their
information organisation
● Long - term planning
Assess whether the objectives are being met in practice
● Control
Examples of strategic information:
● Overall profitability
● The profitability of different segments of the business
● Capital equipment needs
Features of strategic information
● Derived from both internal and external sources
● Summarised at high level
● Directed at senior management
● Relevant to the long term
● It deals with the whole organisation.
● It is often prepared on an ad-hoc basis.
● It is both quantitative and qualitative.
● It cannot provide complete certainty, given that the future
cannot be predicted
, 4.3 Data and Information
Tactical Used by middle managers to decide how the resources of the
information business should be employed Data Information
● Short-term planning
The raw material for data Data that has been processed so as to be
To monitor how resources being and have been employed processing meaningful to the person who receives it
● Control
Examples of tactical information: Facts, events and transactions Knowledge communicated or received
● Productivity measurements (eg, output per direct labour concerning facts or circumstances
hour/per machine hour)
● Budgetary control Processed data
● Variance reports
● Cash flow forecasts
Features of tactical information
● Primarily generated internally
● Summarised at a lower level and is directed at middle
management as well as more senior management
● Relevant to the short and medium term
● Describes or analyses activities or departments
● Prepared routinely and regularly
● Based largely on quantitative measures
● Allows the monitoring of business performance against
goals.
Operational Used by front-line managers
information ● Foremen and supervisors
Ensure that specific tasks are planned and carried out properly
Examples of operational information:
● Day-rate labour hours worked each week by each
employee
● The rate of pay per hour
● Details of deductions
● Details of the time each person spent on individual jobs
during the week
Features of operational information
● It is derived almost entirely from internal sources
● It is highly detailed, being the processing of raw data
● It relates to the immediate term, and is prepared
constantly, or very frequently
● It is task-specific and largely quantitative
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