It explains the concept of Management Accounting.

1. INTRODUCTIO
N TO
MANAGEMENT
ACCOUNTING

2. WHAT IS MANAGEMENT
ACCOUNTING?
Management Accounting is the process of
Measuring,
Analyzing,
and Reporting
Financial and Nonfinancial information that helps
managers make decisions to fulfill the goals of an
organization.

3. OBJECTIVES OF
MANAGEMENT ACCOUNTING
The basic objective of management accounting is
 To assist the management in performing its functions
effectively. The functions of the management are
planning, organizing, directing and controlling.
 To provide relevant information to help managers make
better decisions.
 To provide information for planning, operational control
and performance measurement.

4. FUNCTIONS OF MANAGEMENT
ACCOUNTING
 Provides data- Serves as a vital source of data for
management planning.
 Modifies data- The accounting data required for
managerial decisions is properly compiled and
classified.
 Analyses and interprets data- The accounting data is
analyzed meaningfully for effective planning and
decision-making.

5. Contd..
 Serves as a means of communicating- Provides a means
of communicating management plans upward, downward
and outward through the organization.
 Facilitates control- Helps in translating given objectives
and strategy into specified goals for attainment by a
specified time.
 Uses also qualitative information- Does not restrict itself
to financial data but also uses such information which may
not be capable of being measured in monetary terms.

7. LIMITATIONS OF MANAGEMENT
ACCOUNTING
 Limitations of basic records- Management accounting derives
its information from financial accounting, cost accounting
and other records.
 Persistent efforts- The conclusions draws by the management
accountant are not executed automatically.
 Management accounting is only a tool- Management
accountant is only an adviser to the management.

8. Contd..
 Wide scope- It considers both monetary as well as the
conclusions obtained through it.
 Top-heavy structure- The installation of management
accounting system requires heavy costs on account of an
elaborate organization and numerous rules and
regulations.
 Opposition to change- Management accounting demands
a break away from traditional accounting practices.

9. MANAGEMENT ACCOUNTING
AND FINANCIAL ACCOUNTING
 Financial accounting and management accounting are
closely interrelated.
 There are certain fundamental differences. These
differences can be laid down as follows:
 Objectives: Financial accounting is primarily an
external reporting process while management
accounting is primarily an internal reporting process.
 Analyzing performance: Financial accounting deals
with the aggregates. Management accounting provides
detailed analytical data.

10.  Data used: Financial accounting is concerned with the
monetary record of past events. Management accounting
is accounting for future and, therefore, it supplies data
both for present and future.
 Monetary measurement: In financial accounting only
such economic events find place, which can be described
in money. Management is equally interested in non-
monetary economic events
 Periodicity of reporting: The period of reporting is
much longer in financial accounting as compared to
management accounting

11. Financial accounting simply shows how the
business has moved in the past while Management
accounting shows how the business has to move in
the future.

12. COST ACCOUNTING AND
MANAGEMENT ACCOUNTING
 The terms ‘cost accounting’ and ‘management
accounting’ are often used interchangeably
BUT IN REAL
 Cost accounting is part of Management accounting.
 Cost accounting provides source data for the management
accountant to use.

13. Cost accounting is concerned with the following:
• Preparing statements (e.g. the construction of budgets and
costing statements)
• Cost data collection
• Measuring inventory costs, and the costs and profitability of
products and services.
Management accounting on the other hand is concerned
with the following:
• Interpretation and assessment of financial and accounting
data, and communicating it as information to users, for
example as financial targets or performance measurements.

14. TASK FOR YOU!
Find out the Need and Importance of
Management Accounting in your next class