Paper 2 - Information for Management Control

To develop the ability to use a computer system safely and effectively and to understand the need for data and information to be kept confidential and secure. To develop knowledge and an understanding of how organisations provide basic management information for decision-making, planning and control.

On completion of this paper, candidates should be able to:

• carry out simple visual safety checks on hardware and follow appropriate powering up and shutting down procedures
• understand the purpose of passwords
• access, amend, save and print documents and other files and exit from the relevant software
• use appropriate computer file and folder names
• follow procedures for taking back-up copies of computer files
• understand different types of risk including viruses and hacking
• understand relevant security and legal regulations covering data protection, copyright, health and safety and record retention
• seek assistance when difficulties occur when working with computers
• recognise the need for management information
• identify different elements of cost
• identify different sources of income and expenditure
• code and extract income and expenditure correctly
• deal with problems / errors correctly
• provide comparisons on costs and income
• use relevant software applications to access, analyse, present and communicate information (accounting package, spreadsheet, word processing, e-mail)
• handle confidential information in the correct manner
• present information using house style.

No prior knowledge is required before commencing study for Paper 2. This paper provides the basic techniques required to use a computer system safely and to effectively recognise, provide and maintain management information.

Candidates require a sound understanding of the methods and techniques covered in this paper to enable them to move on to the more complex systems and management control problems covered at subsequent levels.

Some of the methods introduced in this paper are revisited and extended in Paper 4, Accounting for Costs.

(a) Visual safety checks

(i) hardware components

(ii) plugs and cables

(b) Types of system

(i) stand-alone PC

(ii) networked system

(iii) mainframe with terminals

(a) Confidentiality

(i) system access controls

(ii) individual file (document or spreadsheet) protection

(b) Security

(i) back-up copies

(ii) archiving

(iii) secure storage

(iv) theft and fraud

(c) Legal regulations

(i) data protection legislation

(ii) VDU regulations

(iii) computer-related Health and Safety

(iv) document and record retention

(a) Introduction to management information

(i ) the relationship between financial and management accounting

(ii) the purpose of management information: decision making, planning and control

(b) Reporting management information

(i) methods of extracting, analysing, presenting and communicating information (including letter, memo, report and e-mail message)

(ii) handling confidential information

(iii) using software to perform (b)(i) and (ii) when relevant

(iv) understanding of the organisation’s accounting systems and administrative procedures

(a) Elements of cost

(i) materials

(ii) labour (including makeup of gross pay)

(iii) expenses

(b) Responsibility centres

(i ) cost centres

(ii) profit centres

(iii) investment centres

(c) Relevant documents / sources of information

(i) purchase orders and purchase invoices

(ii) sales orders and sales invoices

(iii) policy manual

(iv) payroll

(v) management reports and spreadsheets

(d) Organisational structures

(i) coding systems

(ii) cost classification

(a) Sources of information for comparison

(i) previous period data

(ii) corresponding period data

(iii) forecast data

(iv) ledgers

(b) Variances

(i) adverse / favourable

(ii) exception reporting

(iii) controllable / non-controllable

(iv) reports

(a) Marginal costing

(i) contribution

(ii) break-even

(iii) margin of safety

(b) Management information

(i) extraction from relevant sources

(ii) use in decision-making

(iii) role in organisation

The following topics are specifically excluded from Paper 2:

• software and systems development
• database design and database software.

All areas of the syllabus are equally important.

The examination is a two-hour paper. It can be taken as a written paper or as a computer based exam. Assessment will be based on multiple choice questions covering the breadth of the syllabus, testing that candidates have acquired the necessary knowledge of the areas identified above.

50 multiple choice questions: 100

There are a number of sources from which you can obtain a series of materials written for the ACCA CAT examinations. These are listed below:

(a) Describe the different types of hardware configuration: stand-alone PC, networked system, mainframe with terminals

(b) Explain where the different types of hardware configuration may be used

(c) Describe the hardware and software components of a computer system

(d) Describe simple visual safety checks on computer hardware and ancillaries (plugs and cables) and explain their importance

(e) Describe the correct process for powering up and for shutting down computer systems

(f) Describe how to save, transfer and print documents

(g) Outline the requirements of health and safety legislation related to the use of computer hardware

(a) Explain computer system access controls and procedures for individual file protection

(b) Describe procedures for backing-up, archiving and storing information securely

(c) Discuss the prevention of computer fraud and data corruption, and of hardware/software problems and failure

(d) Discuss security issues related to the location of hardware and software

(e) Outline the requirements of data protection legislation relating to computer software/information

(a) Discuss the purpose of management information: planning, control and decision-making

(b) Distinguish between data and information

(c) Describe the features of useful management information

(d) Describe and identify sources and categories of information

(e) Compare cost and management accounting with external financial reporting

(f) Explain the limitations of cost and management accounting information

(g) Describe the accounting technician’s role in a cost and management accounting system

(a) Discuss methods of analysing, presenting and communicating information

(b) Describe the nature of general purpose application software packages, including word processing and spreadsheets

(c) Identify suitable formats for communicating management information according to purpose

(d) Identify the general principles of distributing reports (e.g. procedures, timing, recipients) including the reporting of confidential information

(e) Interpret information presented in management reports

(a) Describe the organisation, and main functions, of an office as a centre for information and administration

(b) Describe the function and use of a manual of policies, procedures and best practices

(c) Identify the main types of transactions undertaken by a business and the key personnel involved in initiating, processing and completing transactions

(d) Discuss the need for effective control over transactions

(e) Explain and illustrate the principles and practice of double-entry book-keeping

(f) Describe and illustrate the use of ledgers and prime entry records in both integrated and interlocking accounting systems

(g) Identify the key features, functions and benefits of a computerised accounting system

(a) Explain and illustrate the concept of cost centres

(b) Explain and illustrate the concept of profit centres

(c) Explain and illustrate the concept of investment centres

(d) Describe performance measures appropriate to cost, profit and investment centres (cost / profit per unit / % of sales; resource utilisation; ROCE / RI)

(e) Apply performance measures appropriate to cost, profit and investment centres

(a) Explain and illustrate the concept of cost units

(b) Describe the variety of cost classifications used for different purposes in a cost accounting system, including by responsibility, function, behaviour, direct/indirect

(c) Describe and illustrate the nature of variable, fixed and mixed (semi-variable, stepped-fixed) costs

(d) Describe and illustrate the classification of material and labour costs

(e) Prepare, and explain the nature and purpose of, profit statements in absorption and marginal costing formats

(f) Calculate the cost of a product or service

(a) Describe and illustrate the accounting for material costs (NB stock issue pricing is excluded)

(b) Calculate material requirements, making allowance for sales and product/material stock changes (NB control levels and EOQ are excluded)

(c) Describe and illustrate the accounting for labour costs (including overtime premiums and idle time)

(d) Prepare an analysis of gross earnings

(e) Explain and illustrate labour remuneration methods

(f) Calculate the effect of remuneration methods and changes in productivity on unit labour costs

(g) Explain and illustrate the process of cost apportionment and absorption for indirect costs (excluding reciprocal services)

(a) Explain the use of codes in categorising and processing transactions and the importance of correct coding

(b) Describe the material control cycle (including the concept of ‘free’ stock, but excluding control levels and EOQ) and the documentation necessary to order, receive, store and issue materials

(c) Describe the procedures required to ensure the correct authorisation, coding, analysis and recording of direct and indirect material costs

(d) Describe the procedures and documentation required to ensure the correct coding, analysis and recording of direct and indirect labour costs

(e) Describe the procedures and documentation required to ensure the correct authorisation, coding, analysis and recording of direct and indirect expenses

(f) Describe the procedures and documentation to ensure the correct coding, analysis and recording of sales

(a) Explain the purpose of making comparisons

(b) Identify relevant bases for comparison: previous period data, corresponding period data, forecast/budget data

(c) Explain the forecasting/budgeting process and the concept of feedforward and feedback control

(d) Explain the concept of flexible budgets

(e) Use appropriate income and expenditure data for comparison

(a) Explain the concept of exception reporting

(b) Calculate variances between current actual and historical/forecast data (N.B standard costing is excluded)

(c) Identify whether variances are favourable or adverse

(d) Identify possible causes of variances

(e) Explain factors affecting the decision whether to investigate variances

(a) Explain and illustrate the concept of contribution

(b) Calculate and utilise contribution per unit, per £ of sales and per unit of limiting factor

(c) Explain and calculate the break-even point and the margin of safety

(d) Analyse the effect on break-even point and margin of safety of changes in selling price and cost

(e) Describe the assumptions, uses and limitations of marginal costing and break-even analysis