MANAGEMENT

ACCOUNTING
 MANAGEMENT ACCOUNTNG DEFINED

• Management accounting is the presentation of accounting information in

such a way so as to assist management in the creation of policy and in the
day-to-day operations of an undertaking.
 objectives

• To assist the management in promoting efficiency.

• To interpret financial statements to enable the management to formulate
future plans.
• To arrange for the systematic allocation of responsibility for
implementation of plants and budgets.
 objectives

• To analyze monetary and non monetary transactions.

• To compare the actual performance with plan & identifying deviations and
their causes.
• To prepare budget covering all functions of business.
 Need and importance of management
accounting

• Creates harmony between the management & employees.

• Enables the management to improvise its services to its customers.
• Various operations can be planned with the help of accounting information,
budgeting & forecasting.
• Avoid business from facing seasonal fluctuations.
• Helps in communicating up to date information to various parties interested
in successful working of the business organization.
 Need and importance of management
accounting

• The use of management accounting may controlled or even eliminate

various types of wastages.
• The management aims to control the cost of production and at the same
time increase efficiency of employers.
• Different tools of management accounting have provided validity,
objectivity & reliability in business management.
 Functions

1.Forecasting
• Making shorterm & longterm finance and planning the business for future
operations.
2.Organising
•Organising the human & physical resources of the business.
3.Coordinating
• Providing different tools for coordination.
 Contd..

4.Controlling
Controlling performance by using standard costing, marginal costing and
budgetary control.
5.Analysis and interpretation
6.Communicating
7.Economic appraisal
Appraisal of social & economic forces, govt. policies and interpret their
effect on business.
 SCOPE OF MANAGEMENT ACCOUNTING
• Management accounting is concerned with presentation of accounting
information in the most useful way for the management.
• Its scope is, therefore, quite vast and includes within its fold almost all
aspects of business operations.
Financial Accounting: Management accounting is mainly concerned
with the rearrangement of the information provided by financial
accounting. Hence, management cannot obtain full control and
coordination of operations without a properly designed financial
accounting system.
 Contd.

Cost Accounting: Standard costing, marginal costing, opportunity

cost analysis, differential costing and other cost techniques play a
useful role in operation and control of the business undertaking.
RevaluationAccounting: This is concerned with ensuring that capital
is maintained intact in real terms and profit is calculated with this fact in
mind.
Budgetary Control: This includes framing of budgets, comparison of
actual performance with the budgeted performance, computation of
variances, finding of their causes, etc.
 Contd.

Inventory Control: It includes control over inventory from the time it is

acquired till its final disposal.
Statistical Methods: Graphs, charts, pictorial presentation, index
numbers and other statistical methods make the information more
impressive and intelligible.
Taxation: This includes computation of income in accordance with the
tax laws, filing of returns and making tax payments.
 LIMITATIONS OF MANAGEMENT ACCOUNTING

• Based on accounting information

• Wide scope-leads to inaccurate results
• Costly-installation
• Evaluationery stage
• Opposition to change- rearrangement of rules and regulations maynot be
liked by people.
 Who is Management accountant?

• The officer who is concerned with management accounting function in an

organization is known as management accountant.
 Functions of management accountant

• To assure physical protection for the business through internal control &
proper insurance coverage.
• To consult with all segments of management.
• To administer the tax policies & procedures
• To supervise & coordinate preparation of reports to govt. agencies.
• To compare performance with operating plan & standards & to report and
interpret the results of operations to all levels of management and owners
of business as well.
 Functions of management accountant

• To establish, coordinate, administer an integral part of management, an

adequate plan for the control of operations.
• To continuously appraise economic & social forces & govt. influences and
interpret their effect on business.
 Duties of a management accountant

• To maintenance of adequate records of all contracts and leases.

• The preparation as a budget director, in conjunction with other officers of an
annual budget, covering all activities of the corporation for submit to board of
directors prior to the fiscal year.
• The preparation & interpretation of all statistical records & reports of the
corporation.
• The costing of all physical inventories.
• The compilation of production costs.
• Continuous audit of all accounts & records of the corporation wherever located.
 Contd.

• The compilation of costs of distribution.

• The installation & interpretation of all accounting records of the
corporation.
• The preparation & interpretation of the financial statements & reports of
the corporation.