intro. of mgt ac
TRANSCRIPT
UNIT 1
MANAGEMENT ACCOUNTING
PROF. V. GURUMOORTHIDEPT. OF COMMERCE
KASC.09.12.2016
ACCOUNTING
• Accounting means, the art of recording, classifying, summarizing, and interpretation the business transaction which related to money value.
BRANCH OF ACCOUNTING
FINANCIAL ACCOUNTING COST ACCOUNTING MANAGEMENT
ACCOUNTING
Ascertain profit & loss and
indicate financial position of the
business.
To know the COST of
Production/ per unit.
Helps to the manager to take
managerial decision based on Financial & Cost accounting Data.
INTRODUCTION OF MANAGEMENT ACCOUNTING
(ORIGIN)
Management accounting is Recent Origin.
The term was first used in 1950 by a term of accounts visiting USA under the auspices of Anglo-American Council on productivity.
MEANING OF MANAGEMENT ACCOUNTING
• Management accounting is the process of identification, measurement, preparation, analyze, interpretation and communication of financial information used by management to take various decisions for the enterprise.
• Management accounting provides necessary financial information to the managers and to take proper and effective decisions.
• It provides information to all stakeholders of a company.
Managerial decisions
• Make or Buy
• Dropping or Adding Product Line
• Purchase or Lease
• Selling Agents or Sales Force
• Product Mix
• Price Mix
• Promotion Mix
DEFINITION
• “ Management Accounting is concerned with accounting
information that is useful to management.”- Robert Anthony
• “ Management Accounting is concerned with supplying financial
data useful to management at all levels in managing and
administering an enterprise.”- W.B. Meferland
Nature of Management Accounting
1. Providing Financial Information
2. Cause and Effect Analysis.
3. Use of special techniques & Concepts.
4. Decision Making.5. No fixed
Conventions/Proced
ures.
6. Achievement of Objectives.
7. Improving Efficiency8. Forecasting9. Providing of
Information and not Decisions.
•Financial AccountingFinancial accounting forms the basis for analysis and interpretation for
furnishing meaningful data to the management.
•Cost AccountingCost accounting is the process and techniques of ascertaining cost.
Planning, decision making and control are the basic managerial functions.
•Budgeting And ForecastingBudgeting means expressing the plans, policies and goals of the firm for a definite period in future. Forecasting on the other hand, is a prediction of what will happen as a result of a given set of circumstances.
Scope of Management Accounting
• Inventory ControlInventory is necessary to control from the time it is acquire till its final disposal as it involves large sum. The inventory control technique will be helpful for taking managerial decisions.
• Statistical Analysis:In order to make the information more useful, statistical tools are applied. These tools include charts, graphs, diagrams, index numbers, etc…
• Analysis of Data:Financial statements are analyzed and compared with past statement or other firm’s statements.
• Internal Audit:Internal audit helps the management in fixing individual responsibility for internal control.
1. Presentation of Data2. Aid of planning and forecasting3. Help in organizing4. Decision Making5. Effective Control6. Communication of Management Policies7. Effective Control8. Incorporation of Non-Financial Information9. Coordination10.Motivating employees
Functions of Management Accounting
1. Increase in efficiency2. Effective Planning3. Performance Evaluation4. Profit Maximization5. Reliability6. Elimination of Wastages7. Effective
Communication8. Employee Morale9. Control & Co-ordination
Advantage
1. Dependence for basic Records
2. Personal Bias3. It is only a Tool4. Provides only
Data5. Need Experts6. Costly to Install
Disadvantage
FINANCIAL Accounting
COST Accounting
MANAGEMENT Accounting
Financial Accounting summarize transactions taking place during a period with the objective of preparing the financial statements.
Cost Accounting summarized data and total cost incurred during a period.
It provides financial information (analyzed) to the manager to take managerial decision based on financial & cost accounting data
DIFFERENCE BETWEENFINANCIAL & MANAGEMENT
ACCOUNTINGNature FINANCIAL
ACCOUNTINGMANAGEMENT ACCOUNTING
PURPOSE To ascertain Profit & Loss by preparing P&L A/c and reveal the financial position through Balance Sheet.
To provide information to the management for decision making on internal operations.
FOCUS It recording past transactions.(Historical Data)
It focus Management’s future plans.
ANALYZE OF DATA Financial accounting provides consolidate information of the whole enterprise.
It evaluate performance of different department, divisions and as per the requirement of management.
LEGAL REQUIREMENTS
It has become compulsory as per the statutory requirements.
It is of voluntary adoption by the management to function effectively.
NATURE FINANCIAL ACCOUNTING
MANAGEMENT ACCOUNTING
PRINCIPLES AND PROCEDURES
It based on accounting concepts and conventions.
It has no any rigid principles.
FORMAT OF STATEMENTS
It has various financial statements based on revenue, capital, personal and real accounts.
In its only income and expenses based statements.
AUDIT In financial accounting audit is compulsory by chartered accountant.
In management accounting there is no compulsory audit. May be in internal audit done by manager.
REPORTING In financial accounting reports given end of the financial year.
Produce reports frequently.
Nature COSTACCOUNTING
MANAGEMENT ACCOUNTING
PURPOSE To ascertain and control the cost of products or services.
To provide information to management for efficient decision making.
EMPHASIS It is based on both historical and present data.
It deals with future projections based on historical and present cost data.
PRINCIPELS AND PROCEDURES
Established procedures and practice are followed in cost accounting.
No such prescribed practice are followed in it.
DATA USED It uses only quantitative information.
It uses both qualitative and quantitative information.
SCOPE It is concerned mainly with cost ascertainment and control.
It has wide scope. Includes, financial accounting, cost accounting, budgeting… ect.
DIFFERENCE BETWEENCOST & MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTANT
• Management accountant is a person who is entrusted with management accounting.
• He is also known as “Controller of accounts”.• He plays a significant role in decision making in
an organization.
RESPONSIBILITIES & DUTIES
• The installation & interpretation of all accounting records of the company.
• The preparation and interpretation of the financial statements of the
company.
• The compilation of production costs.
• The taking and costing of all physical inventories.
• Continuous audit of all accounts and records of the company wherever
located.
• The preparation and filing of tax returns.
• The maintenance of records of all contracts and leases.
FUNCTIONS OF MANAGEMENT ACCOUNTANT
• To establish, coordinate and administer an adequate plan for the control of operations.
• To compare performance with standards and to report and interpret its results to all levels of management.
• To administer tax policies and procedures.• To supervise preparation of reports to Government
agencies.• To assure protection of assets of the company through
internal control or insurance coverage.• To provide regular information and updates to the
management on various issues, so as to help the management take timely and correct decisions.
MANAGEMENT ACCOUNTING : TOOLS AND TECHNIQUES
A. TOOLS BASED ON FINANCIAL ACCOUNTING
C. TOOLS BASED ON BUDGETING AND FORECATING
B. TOOLS BASED ON COST ACCOUNTING
D. TOOLS BASED ON MATHEMATICS
MANAGEMENT ACCOUNTING:
TOOLS & TECHNIQUES
A. TOOLS BASED ON FINANCIAL ACCOUNTING
Common Size Statement
Comparative Statement
Ratio Analysis
Fund Flow Statement
Cash flow Statement
B. TOOLS BASED ON COST ACCOUNTING
Cost Volume Profit Analysis
Standard Costing
Contribution
Break-Even Point
Marginal Costing
Differential Costing
C. TOOLS BASED ON BUDGETING AND FORECASTING
Business Forecasting
BudgetingProject
Evaluation ( PERT & CPM)
PERT- PROGRAMME EVALUATION AND REVIEW TECHNIQUECPM – COST PER THOUSAND IMPRESSIONS
D. TOOLS BASED ON MATHEMATICS
Correlation Analysis
Regression Analysis
Time Series Analysis
Trend Analysis
Operations Research
Simulation Theory
SOCIAL MESSAGE
Save tree’s soul, It will save your FUTURE
family’s soul…….