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