An Introduction to Management accounting
- 1. Accounting for Management DR.DIVYA M ASSISTANT PROFESSOR MES KEVEEYAM COLLEGE VALANCHERY
- 2. Introduction JAMES H BLISS • Owners/Shareholders/creditors Financial Accounting • Management for cost control Cost Accounting
- 3. Definition According to Anglo American Council of productivity “Management accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and day-to- day operations of an undertaking”.
- 4. Management accounting is that system of accounting which helps the management in carrying out its functions more efficiently Accounting for Management
- 5. Characteristics of Management Accounting 1. Provides accounting information 2. Decision making 3. Studies cause and effect relationship 4. Uses special techniques and concepts 5. Quantitative and qualitative information 6. Multidisciplinary 7. Accounting for future 8. Management oriented 9. Increases efficiency
- 6. Scope of Management Accounting 1. Financial accounting 2. Cost accounting 3. Forecasting and budgeting 4. Cost control techniques 5. Interpretation of financial data 6. Statistical methods 7. Tax accounting 8. Reporting 9. Office services 10. Internal auditing
- 7. Objectives of Management Accounting Planning and policy formulation Helpful in controlling performance Helpful in organising Helpful in interpreting financial information Motivating employees Helpful in making decisions Reporting to management Helpful in coordination Helpful in tax administration
- 8. Basic Principles of Management Accounting Principle of exception Principle of objectivity Principle of consistency Principle of relevancy Principle of integration Principle of revaluation accounting Principle of utilisation Principle of accuracy Forward looking approach
- 9. Functions of Management Accounting 1. Planning and forecasting 2. Modification and verification of data 3. Analysis and interpretation of data 4. Communication 5. Helping in coordination 6. Helping in control 7. Helping in decision making
- 10. Difference between Management Accounting and Financial Accounting Financial Accounting Purpose is to ascertain profit or loss and financial position and present them to owners creditors government,etc Records historical data relating to past Compulsory Lays more emphasis on accuracy Based on Generally Accepted Accounting Principles and conventions Management Accounting Purpose is to provide information to management for decision making concerned with Future Plans and operations Optional Lays more emphasis on quick and prompt reporting Not based on rigid principles but based on internal requirements of Management
- 11. Difference between Management Accounting and Financial Accounting Financial Accounting Prepared for a particular period Limited scope External parties are the users Audit is compulsory Stock is valued on the principle of cost or market price whichever is less Management Accounting No specific period for which management accounts are prepared Wide scope Internal parties are the users Audit is not compulsory No such principle is followed for valuation of stock
- 12. Distinction between Management Accounting and cost accounting Cost Accounting The purpose is to ascertain and control the cost of products or services Includes only cost ascertainment and control Uses only quantitative information Deals with cost Based on both historical and current data precedes Management Accounting Management Accounting The purpose is to provide information to management for planning controlling and decision making Includes financial accounting, cost accounting budgeting, Tax Planning and reporting to management Uses both qualitative and quantitative information Deals with both cost and revenue concerned with translations related to the future Starts where Cost accounting ends
- 13. Need & Importance of Management Accounting Proper planning Effective control Increased efficiency Measurement of performance Maximizing profitability Increase in production Better customer service Quick decision making Improves standards of living of the people Economic development
- 14. Limitations of Management Accounting Based on accounting information Lack of knowledge Not a substitute for management personal judgement Costly Resistance Wider scope
- 15. Tools and Techniques of Management Accounting Financial accounting Financial analysis Historical cost accounting Budgetary control Standard costing Marginal costing
- 16. Decision accounting Revaluation accounting Management information system Statistical technique and operation research Responsibility accounting Other techniques Tools and Techniques of Management Accounting
- 17. Installation of Management Accounting system 1. Preparing organisational manual 2. Preparing forms and returns 3. Requires staffing 4. Classifying accounts and integrating the system 5. Introducing standard costing technique 6. Setting up budgetary control system 7. Introducing operation research techniques
- 18. Functions of Management Accountant Analytical and advisory functions Administrative and procedural functions Functions of Management Accountant
- 19. Functions of Management Accountant Analytical and advisory functions Planning and control of operations Measuring the performance of the organisation Reporting the operational performance Evaluating policies and programs Preparing reports and statements as required under various laws and Furnishing them to government agencies Evaluating external factors such as government policies etc,. and their impacts on the attainment of business Objectives Protecting assets through internal control and proper insurance coverage
- 20. Functions of Management Accountant Administrative and procedural functions Installation of accounting system Arranging audit Introduction of budgeting system Making capital expenditure decisions management of cash preparation of financial statements Inventory management Computation and payment of wages and salary Collection of Data relating to business activities
- 21. Recent Trends in Management Reporting Cash Flow Reporting Segment Reporting Financial Reporting Using IFRS Interim Financial Reporting Economic Value Added Value Added Statements Management Discussion and Analysis Report
- 22. Corporate Governance Report Business Responsibility Report Environmental Reporting Brand Valuation Reporting of Information Relating To Group Companies Vertical Form Of Financial Statements Use Of Charts Graphs and Diagrams Recent Trends in Management Reporting