Upload
shanu-jaiswal
View
217
Download
0
Embed Size (px)
Citation preview
8/2/2019 Management Accounting Concept
1/14
Management Accounting
To quote J. Batty, Management Accountancyis the term used to describe the accountingmethods, systems and techniques, which
coupled with special knowledge and ability,assists management in its tasks ofmaximizing profits or minimizing losses.
Thus, it is the accounting to assist themanagement in planning and decision-making.
8/2/2019 Management Accounting Concept
2/14
Functions
1. Provides Data
2. Modifies Data
3. Analyses & Interprets Data4. Serves as a Means of Communicating
5. Facilitates Control
6. Uses also Qualitative Information
8/2/2019 Management Accounting Concept
3/14
Scope
Financial Accounting
Cost Accounting
Budgetary Control Inventory Control
Internal Audit
Interim Reporting
8/2/2019 Management Accounting Concept
4/14
Utility/Significance
1. Planning
2. Controlling
3. Coordinating4. Organizing
5. Motivating
6. Communicating
8/2/2019 Management Accounting Concept
5/14
Limitations
1. Limitation Of basic Records
2. Persistent Efforts
3. Management Accounting is only a tool4. Wide scope
5. Opposition to change
6. Top heavy structure
8/2/2019 Management Accounting Concept
6/14
Tools of Management Accounting
Financial statement analysis Ratio analysis
Fund flow statement
Cash flow statement Costing techniques-Marginal costing,
differential costing, standard costing, CVP
analysis and variance analysis Budgetary control
8/2/2019 Management Accounting Concept
7/14
Role of Management Accountant
A great variety of accounting information is available to
managers. The accountant chooses the information to be reported to a manager by:
Identifying the purpose for which the information is needed.
Determining the relevance of the information.
The accountant has to identify the specific purpose for which cost accounting
information is required by the manager. Information is relevant if it
Affects the accomplishment of the objectives of the decision maker.
Will change as a result of the decisions or choice made by the decision
maker.
Historically, the Management Accountant was known as Controller since
he/she was in charge of all financial accounting and cost accounting functions.
Line managers are directlyresponsible for attaining this objective as efficiently
as possible.
When a departments primary task is to advise and serve other departments in
the organization, it is a staff department.
8/2/2019 Management Accounting Concept
8/14
Cost accounting
The Chartered Institute of Management Accountants,U.K. (CIMA) defines costingas the technique andprocess of ascertaining costs.
Costing is a tool to determine the cost of products orservice.
Cost accounting analysis and classification of costsor expenditure.
Cost accountancy application of costing and costaccounting principles.
8/2/2019 Management Accounting Concept
9/14
Functions of Cost Accounting
To compute product-wise profit
To serve the management in the valuation
of W-I-P
To install and implement cost controlsystems
To advice management for future
expansion
To guide the management in thepreparation and implementation of
incentive schemes based on productivity
and cost savings.
8/2/2019 Management Accounting Concept
10/14
Financial Accounting
The functions of financialaccounting are concerned with
that of bookkeeping, i.e.
maintenance of records of costs,
debtors, and creditors, etc.
As per the company law
requirements, the company has to
maintain the accounts for theiradoption by the shareholders in
the Annual General Meeting.
8/2/2019 Management Accounting Concept
11/14
Limitations ofFinancial Accounting
Financial accounting doesnt aims at continuousreporting of financial data, which the cost accountingdoes
Financial accounts will not reveal the data by jobs,process, products, etc.
It provides only historical data, and it would be too latefor any corrective action.
It does not provide data for adequate control overmaterials, labour, and overheads.
In financial accounting, there are no systems to setpredetermined estimates, standards, or budgets.
8/2/2019 Management Accounting Concept
12/14
Cost accounting Vs Management
accounting
Primary objectives
Time factor
Governing principles Statutory verification
Data used
Inter-dependence
8/2/2019 Management Accounting Concept
13/14
Financial accounting Vs Management
accounting
Objectives
Analyzing performances
Data used
Monetary management Periodicity of reporting
Nature
Legal compulsion
8/2/2019 Management Accounting Concept
14/14
Financial Accounting vs.
Cost Accounting Purpose
Forms of Accounts
Recording
Items of Costs Analysis ofProfits
Control
Periodicity
Nature of Transaction Inventory Valuation
Figures