Riya Thakkar (4181) Ma

Management Accounting
-A Decisive Oriented Language Of Business-
Thakkar Riya
SY.BBA (4181)
SYNOPSIS
‘Introduction To Accounting’
‘Definitions Of ‘Accounting’
‘Basic Glimpse Of Accounting Cycle’
‘Users Of Accounting Information’
‘Types Of Accounting’
‘Introduction To ‘Management Accounting’
‘Definitions Of Management Accounting’
‘Objectives Of Management Accounting’
‘Nature Of Management Accounting’
‘Need Of Management Accounting’ The user can demonstrate on
a projector or computer, or
‘Importance Of Management Accounting’ print the presentation and
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SYNOPSIS
Tools Used In Management Accounting’
‘Functions Of Management Accounting’
‘Advantages Of Management Accounting’
‘Limitations Of Management Accounting’
‘Scope Of Management Accounting’
‘Changing Role Of Management Accounting’
‘Top 7 Trends In Management Accounting’
‘Distinguish Between Cost Accounting ,Management
Accounting ,Financial Accounting’
‘Conclusion’
The user can demonstrate on
‘References’
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INTRODUCTION
v The Term “Accounting” Or “Accountancy” Refers To, ‘A Comprehensive System For
Collecting,Analyzing And Reporting The Financial Results Of Operations To The Stakeholder’s
Ie.Banker’s, Creditor’s, Shareholder’s, Government And Public In General.’
STEP 1 STEP 2 STEP 3

IDENTIFICATION RECORDING COMMUNICATION

Select Economic Events (Transactions) Record,Classify And Summarize
a projector or computer, or Analyze & Interpret
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v Accounting Is A Profession And Also A Field Of Study Dedicated To Recording
Of Financial Transactions In An Orderly Manner, Resulting In The Preparation
Of Statement of Profit and Loss, Statement of Cash Flows And Balance Sheet.
v It Is An Informative Key Function Of Almost All Businesses; Thereby Furnishing Quantitative Information By
Storing, Sorting, Retrieving, Summarizing, And Presenting The Outcomes Through Various Reports And
Analyses.
v It Provides Useful Data That Delineates Specific Things About A Company’s Financial Information Such As
Its Expenditure’s, Revenue’s, Assets, Liabilities, Funds, Outflows And Ultimately Reflect’s Its Financial
Permanence.
v Also Referred To As “ A Language Of Business” By A Virtue That Accounting Uses Money As A Common
Denominator ; Furnishing The Financial And Non-Financial Information To Economic Entities Such As
Businesses And Corporations Is The Major Intent Of Accounting.
v Although, Accounting Is Generally Associated With The Business,It Is Present Everywhere Ie. Non-Business
Persons Like Housewives,Students Etc Also Make Use Of Accounting By Following A Set Of Rules And
Regulations- Generally Accepted Accounting Principles(GAAP).

v Simply,Accounting Is Nothing But A System Providing Permanent Financial Information About Business
Transactions To Various Internal And External Users. print the presentation and
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DEFINITIONS
v According To American Accounting Association [AAA],
“Accounting Is The Process Of Identifying, Measuring, And Communicating Economic
Information To The Relevant Users By Permitting Informed Judgments And Decisions.”
v According to the American Institute of Certified Public Accountants [AICPA],

“Accounting Is An Art Of Recording And Classifying Business Transactions And Events,
Followed By Interpretation And Communication Of The Results To Person’s Who Make Decision Or Form
Judgement’s.”
According To Auditing Standards Board [ASB],

“Accounting Is The Provision Of Information About The Financial Position,
Performance And Financial Adaptability Of An Enterprise That Is Useful To Wide
Range Of Potential Users In Making Economic Decisions.”
v According To Littleton, The user can demonstrate on

“ Accounting Is Making Possible The Periodic Matching Of Costs(Efforts) And or
a projector or computer,
Revenue.” make it film
v According To Financial Reporting Standards Council [FRSC],
“Accounting Is A Service Activity.It’s Function Is To Provide Quantitative
Information,Primarily Financial In Nature,About Economic Entities,That Is
Intended To Be Useful In Economic Decisions.”
v According to A. W. Johnson,
“Accounting Is A Collection, Compilation And A Systematic Recording Of Business
Transactions In Terms Of Money, The Preparation Of Financial Reports, The Analysis And Interpretation
Of These Reports And The Use Of These Reports For The Information And Guidance Of Management.”
v According To Smith And Ashburn,

“Accounting Is An Art Of Making Significant Summaries,Analysis And Interpretation Of Those
Transactions Thereby Communicating The Results To Person’s Who Must Take Decisions Or Form Judgement’s.”
v Lastly, Accounting As An Information System Can Be Represented As Follows:
INPUT PROCESS OUTPUT

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IDENTIFYING
&
ANALYSING JOURNALISING
RECORDING
REVERSE
ENTRIES 1
POST- 10 2 POSTING
CLOSING TO
TRIAL ACCOUNTING CYCLE 3 LEDGER
BALANCE 9 {The Accounting Cycle Is A Holistic
Process Of Recording And Processing All
Financial Transactions Of A Company,
Right From When They Occur 4 UNADJUSTED
CLOSING 8 To Its Representation On The Financial
TRIAL BALANCE
Statements, Until Closing The Accounts.}
ENTRIES
5
7
6 ADJUSTING
PREPARING
FINANCIAL ADJUSTED ENTRIES
STATEMENTS TRIAL
BALANCE
USERS OF ACCOUNTING
INFORMATION
ACCOUNTING INFORMATION
INTERNAL EXTERNAL
USERS USERS
Owners Creditors
Managers Suppliers
Chairman Customers
Employees Shareholder’s & Investor’s
Board Of Directors Union’s & External Workers
Head Of Departments Government & Tax Authorities
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ACCOUNTING TYPES
FINANCIAL MANAGERIAL COST TAX
ACCOUNTING ACCOUNTING ACCOUNTING ACCOUNTING
PROJECT ACCOUNTING GOVERNMENT FORENSIC ACCOUNTING

ACCOUNTING
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MANAGEMENT ACCOUNTING
v The Term “Management Accounting” Also Known As “Managerial Accounting” Refers To, ‘A Field Of Accounting
Which Deals With Presenting Financial Information To Management; In Such A Way So
That It Can Perform Its Managerial Functions Of Planning,Controlling And Decision-Making In An Effective
An Efficient Manner’ .
v Basically, It Is An Intimate Merger Of Two Terms Ie. MANAGEMENT + ACCOUNTING,

Consequently, Covering All Those Services By Which Accounting Department Can Assist The Top Management
In Formulation Of It’s Policies, Control Of It’s Execution And Appreciation Of Its Effectiveness.
v By Doing So, It Rearranges For Managemental Control To A Greater Extent,

And The Accurate Accountable Data Provided By Financial Accounting Lies Between-
a.) Concluding The Accounting Results On One Hand
b.) Controlling The Business By The Management On The Other.
v Furthermore, It Also Establishes Standards Of Performance In Different Realms Of Activities; In Such A Manner
That Any Deviation Thereon Can Be Easily Measured ,Leading The
To user can demonstrate on
Further Investigation Of The Causes And
Installation Of Prompt Remedial Measures For Rectifying The Same.
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DEFINITIONS
v According To Chartered Institute Of Management Accountants(UK),
“Management Accounting Is An Integral Part Of Management,Concerned With
Identifying,Presenting And Interpreting Information For:
a.) Decision-Making
b.) Safeguarding Assets
c.) Formulating Strategies
d.) Disclosure To Employees
e.) Optimizing The Use Of Resources
f.) Planning And Controlling The Activities
g.) Disclosure To Shareholder’s And Other External Entities”
v According To Shilling Laws,

“Accounting Which Serves Management By Providing Information As To The Cost Of Profit
Associated With Some Portion Of Firm’s Total Operations,Is Called Management Accounting.”
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v According To T.G Rose,
“Management Accounting Is The Adaptation And Analysis Of Accounting
Information With It’s Diagnosis And Explanation In Such A Way So As To Assist
Management”
v According To National Association Of Accountants(US),

“Management Accounting Is The Process Of
INTERPRETATION
ANALYSIS&
IDENTIFICATION MEASUREMENT ACCUMULATION &
PREPARATION COMMUNICATION
Of Financial Information Used By Management To Plan,Evaluate And Maintain Control Within An Organization So
As To Assure Appropriate Use And Accountability For It’s Resources.”
v According To AACA(USA),
“ Management Accounting Is The Application Of Accounting And Statistical Techniques, For The
Specified Purpose Of Interpreting Information Designed To Assist Management In It’s Functions Of Promoting
Maximum Efficiency And In Envisaging And Co-ordinating Their Execution”
v Lastly, According To ICA England And Wales,

“ Any Form Of Accounting Which Enables A Business TocanBedemonstrate
The user Conducted on More Efficiently Can Be
Regarded As Management Accounting.” a projector or computer, or
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OBJECTIVES
v The 5 Major Objectives Of Management Accounting Can Be Highlighted As Follows:
v ‘Management Accounting’ Fundamentally Aims At Providing Managers With Useful Information For
Planning As Well As Decision Making In Revenue And Cost Projection;
Thus,Aiming At Modifying Data To Suite The Requirements Of An Organization.
v Assisting Managerial Personnel In Directing And Controlling Operations With The Help Of Standard
Costing,Budgetary Control And Responsibility Accounting,
Leading To The Formation Of Monetary And Pecuniary Policies On The Basis Of Available Information.
v Setting Goals, Planning The Best Economic Course Of Action, Measuring The Performance Of
Managers,Sub units And Other Employees Working Within An Organization And Ultimately Encouraging
Them For Increasing Their Efficiency Towards The Achievement Of Organizational Goals.
v Analyzing All Those Procedure’s Which Help The Concerned Department To Use It’s Resources In An
Optimal And In A Most Efficient Manner,
Thereby Ensuring Long Term Competitiveness Even Under Changing Circumstances.
v To Submit Comprehensive Reports Which Includes Both Qualitative As Well As
The user can demonstrate on Quantitative Information
a projector
Thereby, Helping An Organization To Make Strategies For or computer, or
The Investment In Years When Business Is
Going With Better Profits And Is Capable To make
OweitThefilm Tax Liability.
NATURE OF
TECHNIQUE OF CAUSE AND

SELECTIVE EFFECT
NATURE RELATIONSHIP
AIDS INDEPENDENT
MANAGEMENT CONVENTIONS
FUTURE PROVIDES
COURSE DATA NOT
ORIENTED DECISION

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Selective In Nature Examines Cause And Effect Future Course Oriented
Relationship
‘Management Accounting’ Is A ‘Management Accounting’ Attempts To ‘Management Accounting’ Unlike
Technique Of Selective Nature As Analyze The Cause-And-Effect Financial Accounting
It Selectively Obtains Data From Relationship By Timely Study Of Project’s The Future Forecast Of
Income Statement And Position Different Variables Affecting Profits Actions, Accounting Data And
State Merit. Such Data Proves To And Profitability Of Business. Statistical Information With The
Be Highly Relevant And Useful It Also Helps In Analyzing The Reasons Help Of Special Techniques And
For The Top Management To So As To Why Profit Or Loss Is More Format’s; Which Vitally Affect
Arrive At Important Decisions Or Less As Compared To Past Period. The Survival And Ultimately The
Based On Different Aspects Of For This Purpose,It Present’s Data In A Success Of Business.
Business. Tabular & Comparative Form,Ratio’s
Are Calculated And Likely Trends
The userAre
can demonstrate on
Projected. print the presentation and
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And
Provides Data Not Decision Aids Management Independent Convention's
‘Management Accountant’s’ Are ‘Management Accounting’ ‘Management Accounting’ Is Not

Only Permitted To Provide Contributes Directly Or Indirectly Restricted By The Rules Of
Organizational Information; To Decision-Making By Financial Accounting Or The
However, Are Not At All Bound Presenting Accurate Information Prescribed GAAP Principles.
To Take Any Financial Decision For Right Decision Making. Additionally, It Only Aims At
Pertaining To The Firm. It Supplies Only Necessary Supplying Accurate Information
Consequently, He/She Can Make Information To The Relevant To Managers In A Way Which Is
Use Of This Information But That Departments And Hence, There Is More Beneficial.
Too Depends On The Firm’s No Fixed-Model Or Competition Thus,It Doesn’t Prescribe Any
Norm; Between Organizations in Terms Specific Format Or Proforma Like
Based On His/Her Efficiency Of Management Accounting. Financial
The user can demonstrate on Accounting.
And Commitment. print the presentation and
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NEED OF
v ‘Management Accounting’ Primarily Aims At Serving People
Who Are Internal To The Business Entity
Ie.Owners,Managers,Chairman,Employees,Board Of
Directors Etc.This Indicates That,It Furnishes The Most
Pertinent Facts And Figures To The Managerial Personnel;
Consequently,Assisting Them To Establish Control. For This
Purpose,It Collects Data From Various Sources And Present’s
The Same To The Top Management Whenever Required And
In The Suitable Form. By Doing So,Management Accounting
Aims At Assisting Management To Take Appropriate
Decision And Discharging Their Responsibility Satisfactorily.
Thus,“Management Accounting” Is Called “Management
Oriented Accounting.”
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INCREASING
COMPLEXITY AND SIZE
OF ORGANIZATIONS
REGULATORY INCREASED EMPHASIS ON
ENVIROMENT QUALITY
FACTORS THAT INCREASE

THE NEED FOR
INFORMATION
INTERCONNECTIVITY AND
WORLD-WIDE ECONOMIC
COMPETITION LIBERALIZATION
RAPID DEVELOPMENT AND
IMPLEMENTATION OF
TECHNOLOGYa projector or computer, or
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IMPORTANCE OF
v The Importance Of ‘Management Accounting’ Is As Follows:
a.) Relevant Costs Analysis:
v Management Accounting Sets-Up A Relevant Cost Analysis System For Determining The Existing Expenses And
Providing Acceptable Suggestions For The Future Activities.
v Before A Company Takes Any Action, It Needs To Explore All Apparent Possibilities And Then Figure Out The Best
Tactic To Increase Profit; This Means That Management Accountants Are Ought To Analyze Different Sales Channels,
Products, Services, And Marketing Activities In Order To Find Out The Most Profitable Business Model.
v Once The Management Accounting Team Is Done With Relevant Cost Analysis, He/She Can Make Better And
Evidence-Based Decisions.
b.) Measures The Performance:

v Management Accounting Monitors The Overall Performance Of An Organization By Using Various Accounting
Techniques Like Cost-Volume-Profit Analysis, Standard Costing, Budgetary Control, Capital Budgeting,
Capital Budgeting, Fund Flow Analysis Etc And Assist’s Management In Arriving At The Correct Decision.
v Hence,Managers By Identifying All Such Variations In The Performance Of A Company
print the presentation and Are Able To Take Corrective
Measures Accordingly, For Removing All The Hindrances. make it film
c.) Better Service To Customers:
v As The Saying Goes, “Great Customer Service Is The Cornerstone Of Customer Retention,” Management Accounting Focuses On
Synchronizing And Organizing Customer Support By Providing Them With Quality Goods And Better Services At Fair Prices, Along
With Adoption Of Various Safety Measures And Quality Standards To Be Maintained While Production Of Goods.
v Additionally,It Also Aids In Maintaining The Price-Stability Of Products By Employing Various Cost Control Devices And Improving
A Company’s Profitability By Managing,Controlling And Eliminating Unwanted Disbursements.
e.) Helps In Making Plans:

v Management Accounting Helps Managers In Planning By Providing Financial And Non-Financial Data At Regular Intervals And
Thereby Assists Management In Making Better Plans For Future Activities.
v For Example, The Reports Prepared Under Product Lines Can Help Decide Whether To Add Or Eliminate A Particular Product Line In
The Current Product Mix.
v Such Planning Occurs At All Levels Ie.First It Occurs At The High Level Of Setting Stratergy,
Then Moves To Broad-Based Potential For Realization Of Goals And Finally Gives A
Thoughtful Consideration To Financial Realities And Anticipated Monetary Outcomes.
v Hence, Managers Through The Availability Of All These Information Are Able To
Perform Better Analysis And Forecasting Which Enables Them In Framing
Proper Plans.
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TOOLS USED IN
Financial Planning Capital Budgeting Budgetary Control Decision Accounting
Marginal Costing Ratio Accounting Standard Costing Control Accounting
Constraint Revaluation Management Statistical

Analysis Accounting Reporting Techniques
Cost Accounting Operations Research Cash Flow Analysis Fund Flow Analysis
Historical Cost Management Analysis Of Financial Trend Analysis And

Accounting Information System Statements Forecasting
FUNCTIONS OF
v Business Leaders Make Decisions By Using The Various Tools And Techniques Provided By Management
Accounting.
v Furthermore, It Also Helps Devise Plans And Policies, Make Decisions, Control The Business’s Overall
Performance, And Analyse The Accounting Information.
v In-Order To Meet These Objectives,The Functions Of Management Accounting Have Been Divided Into Two
Categories:
OPERATING THEORETICAL
FUNCTIONS FUNCTIONS
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a.) Operative Functions:
v “Operative Functions” Are A Core Responsibility Of The Management (Ie.Top Level & Middle Level) Within An Organization.
v The ‘Operative Functions In Management Accounting’ Include Those Tasks Or Duties Which Are Specifically Entrusted To The
Management Accounting Department.
v The Operative Functions Of Management Accounting Are As Follows:
1.) Recording Of Data
2.) Validation Of The Data
3.) Interpretation Of The Data
4.) Communication Of The Data

RECORD VALIDATE INTERPRET
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1.) Recording Of Data:
v The Skill Of Recording Data Involves The Documentation Of Data And It’s Observation In A Variety Of Forms;
Backed Up By A Virtue Of Preserving It For Future Use.
v Basically,Management Accounting Record’s Data Of Financial Nature,
In The Form Of Facts,Figures,Projections,Analysis,Estimates Etc And Thereby Supporting Value Creation Through
Increasing Efficiency, Improving Profitability,Customer Management,Innovation, Intellectual Property Etc.
v The Accounts And Documents Prepared By Such Analysis Are A Repository Of Vast Quantity Of Past Data Which Indirectly
Aids For Making Future Forecasts.
v Additionally, This Information Is Greatly Used By Stakeholders Of The Company,Namely The
Employees,Shareholders,Creditors,Banks And Other Lenders,Regulatory Authorities Agencies And Tax Authorities.
2.) Data Validation:

v Data Validation Means Checking The Accuracy And Quality Of Source Data Before Using, Importing Or Otherwise Processing
The Data.
v Data Validation Is An Essential Part Of Any Data Handling Task Whether It’s In The Field Of Collecting Information,
Analyzing Data, Or Preparing To Present Data To Stakeholders.
v If The Collected Data Isn’t Accurate From The Start, The Results Definitely Won’t Be Accurate Either; And That’s Why A
Management Accountant Verifies And Validates Data Before It Is Used.
v Hence,Ensuring The Integrity Of Data Helps To Ensure The Legitimacy Of Conclusions.
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3.) Analysis & Interpretation Of The Data:
v The Economic And Financial Data As Collected From Various Statements Doesn't Pertain Much Management Utility ,
Unless It Is Properly Analyzed Under The Guidance Of Top Authorities.
v Likewise,The Management Accountant Analyses The Data And Presents It Before The Top Management In A Non-Technical
Manner, Along With His Comments And Suggestions; So That The Owners And The Top Personnel’s May Understand It And Take
Further Decisions Without Any Difficulties.
v Thus,Analysis & Interpretation Puts Life In The Available Data To Speak About Future Trends And Hence, Is Termed As
‘Back-Bone Of Management Accounting’.
4.) Communication:
v The Management Accountant Spends His/Her Maximum Time In Communicating The Analyzed Data, By
Preparing Various Reports And Statements To Motivate The Employees, To Meet Up The Challenges, To
Exercise Effective Control And Ultimately Enabling The Management To Take Sound Decisions.
v Additionally,Various Special Studies Such As Sales Analysis,Economic Forecasts And Price Spread
Analysis Are Also Carried Out For Achieving This Objective.
v Publication Of Company’s Annual Reports Is Also An Important Task Performed By A
Management Accountant; Additionally, He/She Also Communicates With The Outside
World About The Progress Of The Business Through Published Returns. The user can demonstrate on
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b.) Theoretical Functions:
v The Theoretical Functions Of Management Accounting Are As Follows:
1.) Forecasting & Planning
2.) Organizing
3.) Coordinating
4.) Controlling Performance
5.) Special Studies
6.) Protection Of Business Assets
7.) Tax Policies
8.) Doesn't Confine Merely To Financial Data
9.) Furnishes Information As Per Requirements
10.) Miscellaneous Functions
1.) Forecasting & Planning:

v One Of The Most Important Functions Of Management Accounting Is To Provide Necessary Information And Data For Forecasting Short-
Term And Long-Term Plan’s To Guide The Future Operations Of A Business.
v For Doing This, The Management Accountant Uses Various Techniques Of Statistics Like Probability, Trend Study Of Correlation And
Regression; Budgeting And Standard Costing; Capital Budgeting; Marginal Costing,Cash
a projector or Funds
computer,Statements
or Etc.
v Hence, By Using These Important Tools In The Hands Of Management Accountant, He/She
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The Selection Of Company Goals,Formulation Of Policies And Strategies And Resourcemake it film
Allocation To Achieve Goals.
2.) Organizing:
v The Management Accountant Helps Management In Organizing Human And Non-Human Resources By Analyzing Different
Functions And Consequently Assigning Specific Responsibilities Of The Business Operations.
v He/She Tries To Organize The Accounting And Finance Function, By Preparing Budgets And Ascertaining Specific Cost Centers,
Delivering Resources To Each Center And Delegating Their Respective Responsibilities To Ensure Proper Utilization Of Funds.
v With The Help Of These Reports And Information, He/She Can Also Provide Variable Production Cost And Marginal Sales
Reports To The Top Management For Taking Suitable Steps Related To Production And Sales;
Thus, An Organization Can Regulate Or Adjust Its Operations And Activities In A Light Of Changing Condition.
v As A Result, An Interrelationship Develops And Every Part Of An Enterprise Remains Connected And Organized.
3.) Coordinating:
v The Management Accountant Increases The Efficiency Of An Organization By Providing Various Tools Of Coordination Such As
Budgeting, Financial Reporting, Financial Analysis,Interpretation Etc.
v Firstly, It Helps Management In Coordinating Various Activities Of An Enterprise,By Preparing The Functional Budget And
Then Co-Coordinating It By Integrating All Of The Functional Budgets Into One, Which Goes By The Name Of ‘Master Budget.’
v Furthermore, It Also Reconciles The Cost And Financial Accounts, By Setting Standard Costs And Analyzing Variances In Costs
To Facilitate Management By An Exception.
v Hence, A Structured Coordination Contributes To Coherency Within An Organization; Which In Turn Increases Profitability Of A
Concern. a projector or computer, or
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4.) Controlling Performance:
v The Management Accountant Provides Performance Reports And Control Reports, Highlighting The Variances Between Expected
And Actual Performance By Interpretating The Results Of Operation To All The Levels Of Management.
v He/She Helps In Controlling The Performance Of An Organization By Using Various Tools Such As Standard Costing, Budgetary
Control, Accounting Ratios, Cash And Funds Flow Statements, Cost Reduction Programmes; Thus, Evaluating The Capital
Expenditure Proposals And Returns On Investment.
v Hence, Controlling Includes Monitoring, Measuring And Correcting Actual Results To Make Sure That The Goals And Plans Of A
Business Entity Are Achieved Effectively.
5.) Special Studies:

v Modern Business Is Operating On Such Dynamic Conditions,That Even A Minor Change In Business Can Have A Significant
Impact On The Entire Business Out-Turn.
v Therefore,Management Accountants Are Always Keen To Know About The Areas Which Contribute To The Stability And
Profitability Of An Organization.
v Accordingly, To Meet This Objective Management Accountant Undertakes Special Studies Such As
Sales Analysis,Economic Forecasts,Price Spread Analysis Etc.
v He/She Also Tries To Determine The Needs Of Long-Term And Short-Term Capital, Recommend
Appropriate Capitalization Measures, Evaluation Of Alternative Capital Expenditure Proposals
And Their Impact On The Return And Profits Of The Concern. a projector or computer, or
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6.) Protection of Business Assets:
v The Management Accountant Maintains A Separate Fixed Asset Register For Each Type Of Fixed Assets Belonging To The Firm,
He/She Also Frame’s A Set Of Rigid Rules And Regulations For Their Usage Thereby, Ensuring That Those Assets Are Properly
Insured.
v Sufficient Provisions Of Funds Is Also Made Available For Repairs, Maintenance And Replacement Of Those Assets, So That
Production Capacity Of The Enterprise May Not Be Affected Adversely.
7.) Tax Policies:

v A Business Organization Is Liable To Pay Income Tax, Employment Tax, Excise Tax And Various Other Taxes To The Local
Government, State Government And Central Government.
v In Modern Business Organizations,The Management Accountant Is Held Responsible For Tax Administration Ie.Tax Policies And
Tax Procedures.
v This Task Also Involves Submission Of Relevant Information, Documents And Appropriate Arrangements For Taxation On
Monthly,Quarterly And Annual Basis Or In Advance As Required By The Income Tax Act 1961 To Avoid Penal Interest Payment.

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8.) Not Confined Merely To Financial Data:
v Management Accounting Doesn't Restrict Itself Only To Financial Data, But Also Assist’s Management In The Process Of
Decision-Making By Manipulating Upon Various Sources Which Cannot Be Converted Into Monetary Terms.
v For This Purpose, Engineering Records, Case Studies, Minutes Of Meeting, Productivity Reports, Special Surveys And Other
Business Related Documents Are Greatly Relied Upon.
9.) Furnishes Information As Per Requirements:

v Management Accounting Furnishes Statistical Information & Arithmetical Data At Periodic Intervals,
According To The Tarrying Requirements Of The Different Levels Of Management Ie.Top Level, Middle Level And Low Level.
v In Recent Times, The Three-Tier Management System Requires Information Of Various Types And Different Levels;
Ie.The Top Level Management Compels Information In A Capsule Form, Covering All The Aspects Of Business At Relatively
Longer Intervals Whilst Detailed Analysis Relating To A Particular Aspect At Short Intervals.
v Middle & Lower Level Of Management Assembles Strategic Information Which Is Used By Management Accountants To Define
Goals, Priorities, Initiate New Programmes And Develop Policies For Acquisition And Use Of Corporate Resources.
10.) Miscellaneous Functions:

v Besides Above Mentioned Functions, The Management Accountant Presents Useful Information To
Different Functional Authorities And Advice’s For Price Determination.
v He/She Also Helps To Make Strategic Decisions As Seasonal Or Temporary The user can demonstrate on
Suspension Of Production,
Make Or Buy Decisions, Replacement Decisions And Expansion Or Closure OfprintAthe
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Department Etc.
ADVANTAGES
v The Major Advantages Of ‘Management Accounting’ Are As Follows:
ADVANTAGES OF MANAGEMENT ACCOUNTING
SYSTEMATIC MAINTAINS COST-

ANALYSIS TRANSPARENCY
INCREASES SIMPLIFY MOTIVATE ACCURATE MAXIMIZATION STRATEGIC

BUSINESS FINANCIAL THE & OF TECHNIQUE OF
EFFICIENCY STATEMENTS EMPLOYEES RELIABLE PROFIT MANAGEMENT
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a.) Systematic Analysis:
v Management Accounting Present’s Information In The Form Of Charts,Tables,Graphs And Forecast’s It To The Management Team;
Consequently Assisting Them In Decision-Making.
v Based On Information Obtained From These Reports Ie. Surveys, Budgets Or Competitor Analysis, Managers Can Then Define
Objectives And Outline How They Will Be Achieved.
v Besides Monetary Units,It May Also Find Out Measures Which Are Necessary To Use Such As Number Of Labour Hours,Machine
Hours And Product Units For The Purpose Of Productive Analysis.
b.) Increases Business Efficiency:

v Management Accounting Uses Scientific Techniques For Evaluating The Performance Of Businesses And Detecting Any Deviations Or
Fluctuations Among Them.
v It Also Comprises Of Accounting Methods,Systems And Techniques Coupled With Special Knowledge And Ability,Thereby Aiding
Management In Policy Making For An Undertaking.
v Eliminating Wastage Of Raw Materials, Defectiveness And Production-Equipment's Thereby Making Optimum Use Of Resources And
Thus Enhancing The Productivity Of Business Is Always The Prime Moto Of Management Accounting.
v Hence, This Branch Of Accounting Aims At Raising The Overall Efficiency Of Business Organization.
c.) Simplify Financial Statements:

v Management Accountant Thoroughly Examines All The Financial Statements The And Presents
user can Theon
demonstrate
Required Data In A Simplified Form So That The Top Officials Can Analyse aAnd
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Interpret
It With Necessary Conclusions,Comments Etc. make it film
d.) Motivating Employees:
v The Reports Of A Business Operation Are Prepared On Regular Intervals And Submitted Periodically To The Top Management.
v Based On These Reports, Management Can Easily Find Out Whom To Demote, Promote, Reward Or Penalize; Thus, Motivating The
Employees To Work More Precisely.
v The Presence Of Motivating Factors Such As Job Security,Professional Growth,Career Progression And Recognition Encourages The
Employees To Work Harder And Also Enhances Better Productivity.
e.) Reliability:
v The Tools Used In Management Accounting System Are Very Much Reliable; Thus,The Data Provided To Management Becomes
Accurate And Trustworthy.
f.) Maximization Of Profit:

v Every Organization Lays Down A Set Of Specific Standards, And Then Measures The Actual Performance By Finding Out Any Kind
Fluctuations Therein.
Eg:- If Some Product Is Not Performing Well, Or Some Department Is Running Into Unexpected Losses Then Managerial Accounting
Can Help Identify The Underlying Cause.
v It Also Enables Us To Cut Down On Extra Expenditure’s Involved In Business Activities Using Capital Budgeting And Budgetary
Control.
v Additionally, Systematic Regularity In The Business Activity Along Optimum Use OforManpower
a projector computer, or Can Ultimately Take An Organization
To Higher Profits Thus,Achieving Greater Successes. print the presentation and
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g.) Strategic Management:
v Based On The Information Presented By Management Accounting,The Top Management Can Take Decisions About Continuing A
Product Or Modifying The Sale Strategy To Increase The Demand.
v Since, Management Accounting Is Not Regulated By Any Law; The Top Management Can Decide The Areas That Require More
Analysis, Investigation And Accordingly Draw Up Strategies For The Same.
h.) Maintains Cost Transparency:

v Transparency Of Cost Is Another Important Role Played By Management Accounting, As It Properly Monitors All The Cash Inflows
And Outflows Of A Business And Ensures That There Is No Misuse Of Money.
v However, It Works Closely With The IT Department To Ensure That All The Monetary Expenses Are Maintained Properly And That
Too With Proper Budgetary Control.

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LIMITATIONS
v The Major Limitations Of ‘Management Accounting’ Are As Follows:
LIMITATIONS OF MANAGEMENT ACCOUNTING
PSYCHOLOGICAL EVOLUTIONARY
RESISTANCE STAGE
EXPENSIVE BROAD-BASED BASIC INTUTIVE PERSISTENT COMPREHENSIVE

INSTALLATION SCOPE RECORDS DECISIONS EFFORTS COVERAGE
a.) Psychological Resistance:
v The Modern Management Accounting System Spells A Radical Change On The Traditional Managemental Approach; By Confronting
And Solving The Day-To-Day Problems Faced By It.
v This Gives A Calls For Personnel Reorganization As Well As Reorientation Of Their Daily Activities, Bounding To Attract Opposition
Especially From The Labour Force Misconstruing It As A Tool For Their Exploitation.
v Hence,Management Accounting As A New Discipline Is No Exception To This Rule And It Has To Definitely Encounter Psychological
Resistance Atleast In The Initial Stages; Thereby, Allaying The Fears Of The Labour Force Extensively .
b.) Expensive Installation:

v For Installing A System Of Management Accounting In A Business Concern,An Elaborate Organization And Large Number Of
Manuals Are Very Essential .
v This In Turn Escalates The Establishment Charges Such That,Only Large Scale Organizations Can Afford To Install It.
c.) Broad-Based Scope:

v The Scope Of Management Accounting Is Wide And Broad-Based; Thus,Presenting Many Obstacles In It’s Implementation Process.
v It Is Easy To Record,Analyse And Interpret A Historical Event But Seemingly Very Difficult To Perform Such Operations In Case Of
Future Or Unquantifiable Situations.

d.) Basic Records: a projector or computer, or
v Management Accounting Collects Data From Various Sources Like Financial Accounting,Cost Accounting And Other Operational
make it film
Records And If Such Data Is Incorrect Or Partial The Decisions Arrived On Basis Of Such Data May Be Misleading.
e.) Continuance Of Intuitive Decision-Making:
v Management Accounting Eliminates The Traditional Way Of Intuitive Decision Making And Replaces It With
Scientific Decision-Making.
v Unfortunately, Many Management Personnel’s Are Prone To Take Easy And Simple Path Of Intuitive Decision-Making Rather Than
The Difficult But Reliable Scientific Decision Making Process For Their Day-To-Day Functioning.
f.) Persistent Efforts:

v The Conclusion Drawn By Management Accounting May Not Be Readily And Willingly Implementable.
v For This Purpose,The Management Accountant Has To Strive To Convince The Staff Members To Accept It.
g.) Comprehensive Coverage:

v The Fusion Of A Number Of Subjects Like Financial Accounting,Statistics,Engineering,Economics,Taxation Has Culminated In The
Emergence Of Management Accounting.
v Under Such Circumstances,Most Of These Subjects Will Have Its Impact On The Fixation Of Standards As Well As Solutions To The
Problems Connected With The Management Performance.
h.) Evolutionary Stage:

v Management Accounting Is A New Discipline And Is Still In The Infancy Stage, Undergoing The Evolutionary Process.
v Naturally,It Is Prone To Face Certain Obstacles And Impediments Before Achieving
The user can Perfection
demonstrate onAnd Finality Thereby, Removing The
Air Of Doubt Regarding Uncertainty In Their Applications. print the presentation and
make it film
SCOPE OF
v The Scope Of ‘Management Accounting’ Is Very Wide And Broad-Based; Encompassing The Following Fields Of
Activities Within The Ambit Of It:
- Financial Accounting
- Inflation Accounting
- Cost Accounting
- Budgetary Control
- Interpretation & Analysis Of Financial Statements
- Budgeting And Forecasting
- Cost Control Techniques
- Management Information System
- Quantitative Techniques
- Tax Accounting
- Internal Financial Control The user can demonstrate on
- Inventory Control Etc. print the presentation and
make it film
CHANGING ROLE OF
AUTOMATION,COST-CONTROL &
EFFECTIVENESS IN
EFFICIENCY AND END-USER
PERFORMANCE MANAGEMENT
EMPOWERMENT
AND EVALUATION
CONNECTIVITY OF WORKERS THE CHANGING ROLE OF VALUE-CREATION

THROUGH SHARED MANAGEMENT AND
INFORMATION & ACCOUNTING END-USER BUSINESS
INTERCONNECTIVITY, EFFECTIVENESS
FUNCTIONAL REDIFINATION DUE

TRENDS & TRANSFORMATIONS
TO INTRODUCTION OF The user can demonstrate on
IN MANAGEMENT ACCOUNTING
INFORMATION TECHNOLOGY a projector or computer, or
make it film
TOP 7 TRENDS IN
v The Top 7 Trends In Management Accounting Are As Follows:
1.) Management Accounting’s Expanding Role With Enterprise Performance Management[EPM]

2.) The Need For Better Skills And Competency With Behavioral Cost Management
3.) Expansion From Product To Channel And Customer Profitability Analysis
4.) Managing Information Technology And Shared Services As A Business
5.) Co-existing And Improved Management Accounting Methods
6.) Business Analytic Embedded In EPM Methods
7.) The Shift To Predictive Accounting a projector or computer, or
make it film
CURRENT TRENDS FUTURE TRENDS
HIGH EMPHASIS: HIGH EMPHASIS:
ü Budgeting For Planning And Control ü Budgeting For Planning And Control
ü Variance Analysis ü Variance Analysis
ü Capital Budgeting ü Capital Budgeting
ü Return On Investment Techniques
ü Absorption Costing
ü Variable Costing
MODERATE EMPHASIS: MODERATE EMPHASIS:
ü Balanced Scorecard ü Balanced Scorecard
ü Customer Satisfaction Measurement ü Customer Satisfaction Measurement
ü Activity Based Costing And Management
ü Shareholder Value Analysis
ü Bench-Marking
ü Absorption
The userCosting
can demonstrate on
LOW EMPHASIS: LOW EMPHASIS:
make it film
ü Activity Based Costing And Management
ü Shareholder Value Analysis & Bench-Marking
DISTINGUISH
POINT OF MANAGEMENT COST
FINANCIAL ACCOUNTING
DIFFERENCE ACCOUNTING ACCOUNTING
‘Financial Accounting’ Is An
‘Management Accounting’ Is ‘Cost Accounting’ Is An
Art Of Documenting,
Concerned With The Application Of Accounting And
Summarizing, And Reporting
Presentation Of Professional Costing Principles, Methods
The Transactions Arising From
Knowledge And Abilities; And Techniques In The
MEANING Business Operations,Which Are
To Reveal Accounting Assessment Of Costs Or Analysis
In Part Or Least,Of A Financial
Information Which May Help Of Excess Cost Incurred As
Character And Then
Management In Planning And Compared With Previous
Interpretating Their Results
Control For Their Undertakings. Experience Or Standards.
Thereoff.
‘Financial Accounting’ Is
Structurally Based On ‘Management Accounting’ Isn’t ‘Cost Accounting’ Is
Generally Accepted Accounting Structurally Based On Any Such Structurally Based On Certain
PRINCIPLE Principles (GAAP) & Other Set Of Principles Except For Rules,Principles And Procedures
Accounting Conventions Which Two Ie.Principleprint
OftheCausality
presentation and Specified By An Appropriate
Are To Be Strictly Followed By make it film
& Principle Of Analogy. Authority Ie.ICWAI .
Certified Accountants.
‘Management Accounting’ Can

‘Financial Accounting’ Project’s Use Any Accounting Technique Or
It’s Information By Preparing Practise, Whichever Generates The ‘Cost Accounting’ Record’s The
Trading Account, Profit & Loss Useful Information; Cost Of Producing A Product, By
PROJECTIONS Account And Balance Sheet; And The Data Generated Could Projecting Through Cost Statement
Thus, Exhibiting The Financial Be In The Form Of Fact’s,Figure's Or Job Cost Sheet.
Position Of The Firm . Estimates,Projections,
Analysis Etc.
Financial Statements Are The Users Of Managemental

Unlike Financial Accounting,
Standardized And Are Mainly Reports Are The Various Internal
Cost Reports Don’t Adhere To Set
Meant For External Users Of The Members At Different Levels
USERS Standards And Can Be Flexible To
Business Enterprise Within A Business Enterprise
The Needs Of Various User’s
Ie.Shareholders,Creditors, Ie.Owners,Managers,
Within An Organization.
Suppliers Etc. Employees Etc.
‘Management Accounting’ ‘Cost Accounting’ Record’s Both
INFORMATION ‘Financial Accounting’ Only print the presentation and
RECORDED
Record’s Both Monetary And
make it film Monetary And Non-Monetary
Record’s Monetary Transactions.
Non-Monetary Transactions. Transactions.
‘Financial Accounting’ Is Used To ‘Management Accounting’ Is

‘Cost Accounting’ Is Used To
Create Budgets,Understand Public Used To Provide Detailed And
Allocate,Ascertain,
Perception,Track Disaggregated Information About
Accumulate And Maintain
Efficiency,Analyze Product Products,Individual Activities,
USE Accounting For A Cost ;
Performance,Develop Plant-Operations And Tasks;
Thus,Eliminating Less-Profitable
Short And Long-Term Strategies Thus, Helping Management In
Items And Concentrating On The
As Well As In Aiding Several Decision Making And Policy
One’s That Generate More Profit.
Other Decisions. Formation.
‘Financial Accounting’ Records ‘Management Accounting’

‘Cost Accounting’ Records
Transactions Using Regression Records Transactions Using
Transactions Using Uniform
Analysis,High-Low Revaluation
METHODS Costing,Absorption
Method,Scattergraph Accounting,Budgetary
Costing,Historical Costing,Direct
Method,Account-Analysis Method Control,Standard Costing,
Costing Etc.
Etc. Fund-Flow Statement Etc.
In General ,There Are No Set
print the presentation and A Set Format Is Used For
A Set Format Is Used For make it film
FORMAT Formats For Presenting Presenting Costing Information.
Presenting Financial Information.
Managemental Information.
‘Cost Accounting’ Records Both

‘Financial Accounting’ Records ‘Management Accounting’ Historic As Well As
Historical Cost,Defined As The Records Manufacturing Cost, Pre-Determined Cost, Defined As
NATURE Original Cost Of The Non-Manufacturing Estimated Cost Made By
Product,When Acquired By The Cost,Opportunity Cost,Sunk Cost Manufacturing Company Even
Company. Etc. Before The Production Process
Starts.
Financial Reports Pertain To Managemental Reports Are Very Cost Reports Pertain To Cost Per
Company As A Whole And Are A Precise And Pertain To Individual Item As Well As To The Profit Or
FOCUS
Combination Of Multitudinal Sections Or Departments Within Loss Associated With An
Data. An Organization. Individual Product.
‘Cost Accounting’ Stresses On
‘Management Accounting’ Lays
In ‘Financial Accounting’ Precision And Involves Assigning
No Emphasis On Precision As The
Precision Is Stressed Greatly,Since Costs To Cost Objects That Can
PRECISION Data And Particulars Compiled,
Past Result’s Of A Business Are Include A Company's
Are Merely Estimates And Are
Reflected Through It. Products,Services,Or Any Business
Related ToTheThe Future.
user can demonstrate on
Activity .
‘Managementprint the presentation and
Accounting’
‘Financial Accounting’ Doesn’t make it film Cost Accounting Only Record’s
ASPECT Record’s Both Qualitative And
Record’s Qualitative Aspect. Quantitative Aspect.
Quantitative Aspects.
‘Financial Accounting’ Statements ‘Management Accounting’ ‘Cost Accounting’ Statements re

Are Developed For A Definite Statements Are Developed As And Developed As And When Desired
PERIOD
Period,Usually A Year Or A Half- When Desired By Management By Management Ie.Monthly,
Year. Ie.Monthly, Quarterly, Yearly Etc. Quarterly, Yearly Etc.
As Per Companies Act 2013, In Modern Times, It Isn’t Cost Auditing Statements Have
It Is An Obligation On Every Obligatory For Any Business Been Mandated Under
Business Concern, Concern To Install A System Of Companies(Cost Records And
OBLIGATION
To Adopt Financial Accounting Management Accounting As It’s Audit) Rules,2004 And Are
And Disclose It’s Results To The Installation Maybe Quite Applicable To Every Company
Rightful Owners Periodically. Expensive. Registered Under The Act.
The Cost Auditor Shall Send His

The Result Of A Financial Managerial Statements Are Not Report To The Central
Statement Audit Is Reported By Subject To Any Statutory Audit. Government And To The
VERIFICATION An Auditor,Attesting To The Ofcourse,ThereThe
AreuserManagement
can demonstrate on
Concerned Company Within One
Fairness Of Presentation And Audits But Are
printCompletely
the presentation and Hundred And Eighty Days From
Other Related Disclosures. Voluntary,make it film The End Of The Company's

Financial Year.
CONCLUSION
v Management Accounting Identifies,Collects,Measures,Classifies And Reports Information That Is Useful To
Management In Decision-Making,Planning & Controlling.
v Comprehensively, It Also Comprises Of Rearrangement,Combination Or Adjustment Of The Orthodox

Accounting Figures Which May Be Required To Provide The Chief Executive With The All The Information
Through Which He/She Can Control The Business.
v It Is Not Only Restricted To The Use Of Financial Data And A Part Of Costing But May Also Be Aided By
Scientific Disciplines Such As Economics,Mathematics,Finance, Statistics And Operations, Thereby Assisting
The Top Management & The Organization In Decision-Making Related Activities.
v Hence, The Concept Of “Management Accounting” Has Been Studied Thoroughly And All The Concepts Under
It Have Been Scrutinized In Detail.
make it film
REFERENCES
v Management Accounting Textbook (Nirali Publication) By Dr.Suhas Mahajan And Dr.Mahesh Kulkarni.
v Management Accounting Textbook(Thakur Publication) By Dr.Ganesh Patare And Prof.Snehal H. Borkar
v https://onlineaccountinghub.com/objectives-of-management-accounting/
v https://www.investopedia.com/terms/m/managerialaccounting.asp
v https://theintactone.com/2019/06/04/ma-u1-topic-1-management-accounting-nature-and-scope/
v https://www.longdom.org/open-access/changing-role-of-management-accounting-in-21st-century.pdf
v https://www.cchcpelink.com/top7trends

v https://cleartax.in/s/management-accounting a projector or computer, or
make it film
Thank-You
Prepared Under The Guidance Of Prof.Shilpa Gawande

Riya Thakkar (4181) Ma

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Management Accounting

-A Decisive Oriented Language Of Business-

STEP 1 STEP 2 STEP 3

The user can demonstrate on

The user can demonstrate on

v According to the American Institute of Certified Public Accountants [AICPA],

According To Auditing Standards Board [ASB],

v According To Littleton, The user can demonstrate on

v According To Smith And Ashburn,

v Lastly, Accounting As An Information System Can Be Represented As Follows:

INPUT PROCESS OUTPUT

PROJECT ACCOUNTING GOVERNMENT FORENSIC ACCOUNTING

v Basically, It Is An Intimate Merger Of Two Terms Ie. MANAGEMENT + ACCOUNTING,

v By Doing So, It Rearranges For Managemental Control To A Greater Extent,

v According To Shilling Laws,

v According To National Association Of Accountants(US),

v Lastly, According To ICA England And Wales,

TECHNIQUE OF CAUSE AND

The user can demonstrate on

Provides Data Not Decision Aids Management Independent Convention's

‘Management Accountant’s’ Are ‘Management Accounting’ ‘Management Accounting’ Is Not

FACTORS THAT INCREASE

b.) Measures The Performance:

e.) Helps In Making Plans:

Marginal Costing Ratio Accounting Standard Costing Control Accounting

Constraint Revaluation Management Statistical

Historical Cost Management Analysis Of Financial Trend Analysis And

The user can demonstrate on

2.) Data Validation:

1.) Forecasting & Planning:

5.) Special Studies:

7.) Tax Policies:

The user can demonstrate on

9.) Furnishes Information As Per Requirements:

10.) Miscellaneous Functions:

ADVANTAGES OF MANAGEMENT ACCOUNTING

SYSTEMATIC MAINTAINS COST-

INCREASES SIMPLIFY MOTIVATE ACCURATE MAXIMIZATION STRATEGIC

b.) Increases Business Efficiency:

c.) Simplify Financial Statements:

f.) Maximization Of Profit:

h.) Maintains Cost Transparency:

The user can demonstrate on

LIMITATIONS OF MANAGEMENT ACCOUNTING

EXPENSIVE BROAD-BASED BASIC INTUTIVE PERSISTENT COMPREHENSIVE

b.) Expensive Installation:

c.) Broad-Based Scope:

The user can demonstrate on

f.) Persistent Efforts:

g.) Comprehensive Coverage:

h.) Evolutionary Stage:

CONNECTIVITY OF WORKERS THE CHANGING ROLE OF VALUE-CREATION

FUNCTIONAL REDIFINATION DUE

1.) Management Accounting’s Expanding Role With Enterprise Performance Management[EPM]

‘Management Accounting’ Can

Financial Statements Are The Users Of Managemental

‘Financial Accounting’ Is Used To ‘Management Accounting’ Is

‘Financial Accounting’ Records ‘Management Accounting’

‘Cost Accounting’ Records Both

‘Financial Accounting’ Statements ‘Management Accounting’ ‘Cost Accounting’ Statements re

The Cost Auditor Shall Send His

Other Related Disclosures. Voluntary,make it film The End Of The Company's

v Comprehensively, It Also Comprises Of Rearrangement,Combination Or Adjustment Of The Orthodox