Download - Managerial Accounting - Dr. Varadraj Bapat Fundamentals of Managerial Accounting Module 1
Managerial Accounting - Dr. Varadraj Bapat
Dr. Varadraj Bapat
Chartered Accountant Cost Accountant Ph.D., IIT B, Powai, Mumbai
Contact Information:
Managerial Accounting - Dr. Varadraj Bapat
LEARNING OBJECTIVES
Need to Know About Accounting Managerial Accounting Financial Statements - Balance Sheet,
Income Statement
Managerial Accounting - Dr. Varadraj Bapat
Need to Know About Accounting
Need to Know About Accounting and Finance
Managerial Accounting - Dr. Varadraj Bapat
“Why do I need to learn about finance …
I am very good in my own area of specialization”How would you react to the
above statement?
Managerial Accounting - Dr. Varadraj Bapat
The job content
Functional
Expertise
Management & Finance Expertise
As you move up ..
Managerial Accounting - Dr. Varadraj Bapat
About Managerial Accounting
What is Accounting? Financial Accounting, Cost Accounting and
Management Accounting Financial Accounting and Financial
Management Finance and complexity of organisation
Managerial Accounting - Dr. Varadraj Bapat
Accounting
Language of Business Performance is reported and
evaluated in financial terms Knowledge is useful for
personal investment and tax planning as well
Managerial Accounting - Dr. Varadraj Bapat
It is not necessary to become accountant
But its very useful if every one understands the accounting and financial concepts and terminology properly
Accounting
Managerial Accounting - Dr. Varadraj Bapat
Need to Learn Accounting
It assists in management Will help in planning,
organisation and control of business
Leads to increase in efficiency of business
Profit maximization
Managerial Accounting - Dr. Varadraj Bapat
Streams of Accounting
Financial Accounting, Cost Accounting and Management Accounting
Let us understand the similarities and difference in these three streams of accounting
Managerial Accounting - Dr. Varadraj Bapat
Financial Accounting
Recording of Financial Transactions
Reporting of Financial Results Preparation of Financial
Statements Targeted to External Users
Managerial Accounting - Dr. Varadraj Bapat
Cost Accounting
Recording of Costs Analysis of Costs Preparation of Cost
Statements Targeted to Internal Users
Managerial Accounting - Dr. Varadraj Bapat
Management Accounting
Recording of Financial & other data
Analysis of Financial and other information
Preparation of Statements for Managerial Decisions
Managerial Accounting - Dr. Varadraj Bapat
Management Accounting
Targeted to Internal Users - All levels of Management
This is a broader concept encompasses Financial and Cost Accounting
Managerial Accounting - Dr. Varadraj Bapat
Meaning of Management Accounting
Any form of accounting which enables a business to be conducted more efficiently can be regarded as Management Accounting. (Institute of Chartered Accountants of India- ICAI)
Management Accounting is the
Managerial Accounting - Dr. Varadraj Bapat
application of professional knowledge and skill in the preparation of accounting information in such a way as to assist management in the formation of policies and in the planning and control of operations of undertaking. (International Capital Market Association, London- ICMA)
Managerial Accounting - Dr. Varadraj Bapat
Financial Management
Financial Accounting, Managerial Accounting and Financial Management: Relationship
Financial Management deals with raising and utilization of funds
Raising of funds may include Cost of Capital, Capital Structure
Managerial Accounting - Dr. Varadraj Bapat
Financial Management
decisions, Capital Markets, IPOs and so on
Financial Management deals with raising and utilization of funds
Utilization of funds may include Capital Budgeting, Portfolio Management, Working Capital Management and so on
Managerial Accounting - Dr. Varadraj Bapat
Managerial V/s Financial Accounting
Accounting System(accumulates all accounting data)
Accounting System(accumulates all accounting data)
Managerial AccountingInformation for decision
making, and controlof an organization’s
operations.
Managerial AccountingInformation for decision
making, and controlof an organization’s
operations.
InternalUsers
ExternalUsers
Financial AccountingPublished financial
statements and otherfinancial reports.
Financial AccountingPublished financial
statements and otherfinancial reports.
Managerial Accounting - Dr. Varadraj Bapat
Complexity of Organisation
Finance and complexity of organisation
As the organizations grow, they become complex
Ownership and Management are separated
Managerial Accounting - Dr. Varadraj Bapat
Complexity of Organisation
Ownership is widespread This increases the importance of
Finance function
Managerial Accounting - Dr. Varadraj Bapat
About this course
Managerial Accounting Course The course will cover Financial
Accounting, Cost Accounting and Management Accounting
Financial Management is dealt in a different course
Managerial Accounting - Dr. Varadraj Bapat
Financial Statements
What are they? Which are important Financial
Statements? What purposes do they serve?
Managerial Accounting - Dr. Varadraj Bapat
Company or Organisation
These two are always
equal
RESOURCES FOR
BUSINESS
PROVIDERS OF MONEY
Managerial Accounting - Dr. Varadraj Bapat
The Basic Business Model
Billing
Money
Procurement
ConsumptionDelivery
Collection
The Money Cycle
Value Addition
Cycle
Infrastructure
People
Managerial Accounting - Dr. Varadraj Bapat
To be profitable, our revenue should be more than our cost ! This would make the organisation stronger, healthy and long-lasting.
Infrastructure
Billing
Money
Procurement
ConsumptionDelivery
Collection CostsRevenue
Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet Profit & Loss Account
Liabilities
Capital
Borrowings from Banks / FIs
Current Liabilities
Assets
Fixed Assets
Current Assets or Working Capital
Human Assets
Outstanding
Infrastructure
People
Procurement & Inventory
Consumption & WIPDelivery &
Billing
CollectionMoney
RevenueCosts
Profit/ Loss
Balance Sheet shows the financial position of organisation, while Profit & loss Account shows the profitability of organisation.
Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet shows the cumulative position of resources (assets) and sources of funds (liabilities) at the end of the year. Profit & Loss Account shows ‘Revenue & Cost’ performance during a quarter/ year.
Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet Profit & Loss Account
Liabilities
Capital
Borrowings (eg.from Banks)
Current Liabilities
Assets
Fixed Assets
Current Assets or Working Capital
Human Assets
Outstanding
Infrastructure
People
Procurement & Inventory
Consumption & WIPDelivery &
Billing
CollectionMoney
RevenueCosts
Profit
Profits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing.
Reserves
Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet Profit & Loss Account
Liabilities
Capital
Borrowings (eg.from Banks)
Current Liabilities
Assets
Fixed Assets
Current Assets or Working Capital
Human Assets
Outstanding
Infrastructure
People
Procurement & Inventory
Consumption & WIPDelivery &
Billing
CollectionMoney
RevenueCosts
Profit
Profits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing.
Reserves
Managerial Accounting - Dr. Varadraj Bapat
Balance sheet may be prepared at any time showing the position as on that date.
Profit and loss account may be prepared for any particular period.
Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet
Owners Funds Non Current
liabilities Current
liabilities
Fixed Assets Non Current
Investments Other non
current assets Current
Assets
Managerial Accounting - Dr. Varadraj Bapat
The Annual ReportUsually Contains ...
– financial statements which consist of
• Balance sheet, Profit & Loss A/c• Cash Flow Statements• notes to the financial statements• disclosure of accounting policies
Managerial Accounting - Dr. Varadraj Bapat
The Annual ReportUsually Contains ...
- Chairman’s Statement- Board of Directors & Committees- Directors Report- Directors Responsibility Statement- Auditors Report- Report on Corporate Governance
Managerial Accounting - Dr. Varadraj Bapat
The Annual ReportUsually Contains ...
- Disclosure regarding Employee Stock options Schemes
- List of employees receiving remuneration exceeding Rs. 60 Lakhs
- Conservation of Energy Reports