MANAGEMENT

ACCOUNTING
AN INTRODUCTION
 What is Mgmt Accounting
 According to Institute of Chartered Accountants,
England- “ Any form of accounting which
enables a business to be conducted more
efficiently can be regarded as Mgmt
Accounting.”
 According to Anglo- American Council of
productivity – “Mgmt Accounting is the
presentation of accounting information in such a
way as to assist mgmt in the creation of the
policy & in the day to day operation of the
undertaking.”
 In nutshell
 Mgmt accounting includes analysis,
interpretation and presentation of
accounting information to the mgmt which
help in discharge of their functions
regarding formulation of policy ,
controlling and decision making and for
the effective implementation of the same.
 Objectives of Mgmt Accounting

 According to Howard and Brown – ‘the primary objective of MA

should be to assist the mgmt in decision making and controlling function.’
1. To help in planning and the policy making.
2. To help in Organization
3. To help in Decision making
4. To help in controlling
5. To help in Co-ordination
6. To help in Communication
7. To help in Reporting
8. To assure responsibility
9. To help in Motivation
10. To fulfill legal requirement
 Scope of MA
 General accounting
 Cost accounting
 Cost Analysis and control
 Budgetary control and Forecasting
 Statistical Methods
 Operation research
 Taxation
 Reporting
 Internal Audit
 Function of MA
 James H.Bliss – ‘ the real function of all
accounting work is to render service to
business mgmt. the service lies in placing
before mgmt or the business executive the
most complete information about their
affairs, analyzed and interpret so as to
readily understood and effectively used in
guiding and controlling heir operations
and transactions more profitability,
economically and conservatively.’
 The function is now classified into
two parts
 Operation Functions
 Theoretical functions
 Operational functions
 Planning and forecasting
 Organization
 Controlling
 Co-ordination
 Motivation
 Theoretical function
 To make accounting information Available
 Recording the data
 Verification of correctness of data
 Tools of mgmt accounting
 Financial Planning
 Financial Accounting and analysis
 Fund Flow Statement
 Cash flow analysis
 Historical Cost accounting
 Marginal Costing
 Budget and budgetary control
 Decision Accounting
 Return on capital invested
 Control accounting
 Statistical techniques
 Revaluation accounting
 Standard costing
 Importance of MA
 Availability of information at different levels.
 Helpful in planning
 Determination of objectives
 Helpful in decision making
 Proper control and mgmt
 Easy scientific mgmt
 Increase in productivity
 Maximum profitability
 Better production at low cost development of feelin gof
responsibility
 Role of MA in decision making
 There are two types of Decisions
 Operating Decisions
 Organizational Decisions
 Operational Decisions
Decision regarding price determination-
i) Determination of lowest price
ii) Decision regarding best level of activity
iii) Acceptance or non acceptance of order at special price
Decision regarding Shut Down-
i) Shut down for short period
ii) Vol. of production in seasonal industry
Decision Regarding Profitability-
i) To continue profitable department
ii) To continue production of profitable products
 Decisions about Sales
i) Reduction in selling price or increase in sales vol.
ii) Determination of optimum sales mix
 Organizational decisions
 Make or buy decisions
 To lay off or mfg parts of goods
 To install profitable machine or plant
 To buy a machine or hire it
 To produce one product in place of another
 To close factory during recession
 Limitation of management
accounting
 Based on financial accounting information
 Effect of time factor
 Need of continuity
 Not an alternative to administration
 Expensive system
 Need of knowledge of all related subject
 Lack of objectivity
Qualification of Mgmt Accountant
 Knowledge of managerial functions
 Competency of all branches of accounting
 Knowledge of statistics
 Knowledge of Economics
 Knowledge of Law
 Knowledge of Psychology
 Personal qualities
 Personality -
1. Ability
2. Understanding
3. Knowledge
4. Balanced outlook
5. capacity
 Recent development in MA
 Strategic cost management
 Target cost management
 Activity based costing
 Total quality management
 Life cycle costing
 Kaizen
S.N BASIS MANAGEMENT FINANCIAL
o ACCOUNTING ACCOUNTING
1 Objectives Serve the Mgmt for internal use Serve the Mgmt as well
as outsiders
2 Period No Accounting period A particular accounting
period
3 Use internal use External use
4 Legal Voluntary not compulsory compulsory
compulsion
5 Nature Future plans Historic data
6 Scope Analytical data Whole picture
7 Accuracy May be accurate may not be Should be accurate and
accurate precise
8 Publication Not published published
9 Auditing Not required to be audited required to be audited
10 Monetary &Non- Both Only monetary
monetary
transaction
11 Accounting No accepted principles Generally accepted
principle and principle, concepts and
concepts conventions
12 Performa No legal formats are required Specified Performa
13 Accounting Not applicable AS, as per Instt. Of CA
Standards
14 Actual & Both Only actual
Projected Data