D2: Performance Measurement and Control | Sources of Management Information (ACCA F5)

D2- Sources of Management Information

Sources of Management Information identifies the internal and external sources of information; demonstrates how this information can be used for control purposes; identifies the direct data capture and process costs of management accounting information; identifies the indirect costs of producing information and discusses the limitation of using externally generated information.

Sources of Management Information

a) Identify the principal internal and external sources of management accounting information.

Internal sources of information includes “financial accounting records and other systems closely tied to the accounting system.” Capturing internal information involves a system for collecting and measuring transaction data, informal communication and communication between managers.

External sources of information includes several sources including directories, associations, the internet, government publications and statistics, competitor financial reports, magazines, papers and theses, suppliers and data warehouses.

b) Demonstrate how these principal sources of management information might be used for control purposes.

One main way that control can be achieved is through the “feedback of internal information.” Control requires information to compare planned versus actual and make changes where necessary. Some important examples of information are:

  • Payroll information
  • Wage payments
  • Inventory levels

c) Identify and discuss the direct data capture and process costs of management accounting information.

The costs of collecting, processing and producing internal information can be separated into three different costs:

  • Direct data capture costs
  • Processing costs
  • Indirect costs

With direct data capture, data does not have to be entered into the system. Instead it is entered by a computer reader. Costs include purchasing the right equipment (e.g. barcoding, scanners), and labour costs to facilitate data capture.

With processing, data has to be entered into the system. Costs include labour costs and data analysis.

d) Identify and discuss the indirect costs of producing information.

There are five types of costs:

  • Direct search costs
  • Indirect access costs
  • Management costs
  • Infrastructure costs
  • Time-theft

e) Discuss the limitations of using externally generated information.

The limitations of using externally generated information include:

  • Relevance
  • Cost
  • Availability
  • Bias
  • Accuracy
  • Safety
  • Control

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