Management

Accounting
Introduction
What word comes to your mind when ask
about Accounting?
 Introduction
 Accounting as an information system is the process of
identifying, measuring and communicating the economic
information of an organization to its users who need the
information for decision making. It identifies transactions
and events of a specific entity.
 Definition
 Accounting is “the art of recording, classifying and
summarizing in a significant manner and in terms of money,
transactions and events which are in part at least, of a financial
character and interpreting the result thereof.”
What word comes to your mind when ask
about Management?
 What do Managers Do?
 Forecasting
 Supply Chain Management
 Facility Layout and Design
 Technology Selection
 Quality Management
 Purchasing
 Resource and Capacity
Management
 Process Design
 Job Design
 Service Encounter Design
 Scheduling
 Sustainability
Management Accounting
“is a term used to describe the
accounting methods, systems and
techniques which coupled with special
knowledge and ability assist
management in its task of maximizing
profits and minimizing losses.”
 Objectives of Account
 To keep systematic record
 To ascertain the financial position of the
business
 To portray the liquidity position
 To protect business properties
 To facilitate rational decision making
 To satisfy the requirements of law
 Scope of Management Account

 Cost Accounting
 Tools and technique of management control
 Statistical and quantitative techniques
 Tax accounting
Functions of management account

 Furnishing relevant and vital data

 Compilation of data in suitable form
 Analysis and interpretation
 Planning
 Decision making
 Nature
1. No Fixed Norms Followed
In financial accounting, we follow different norms and rules for
creating ledgers and other account books. But there is no need to
follow fixed norms in management accounting. Management
accounting tool may be different from one organization to other
organization. Using of different tools of management accounting
is fully dependent on the persons who are using it. So, business
policy of each organization affects rules and regulation of
applying management accounting.
2. Increase in Efficiency
It is the nature of management accounting that it is used for
increasing in the efficiency of organization. It scans the points of
inefficiency through analysis of accounting information. By
taking action for improving, organization can increase the
efficiency.
3. Supplies Information not Decisions Management accountant
supplies accounting facts and information and also provides
interpretation, but decision making is fully dependent on higher
authorities.
4. Concerned with Forecasting It is the temperament of
management accounting that it is fully concerned with forecasting.
In management accounting, historical accounting information is
analyzed through common size financial statement, ratio analysis,
fund flow analysis and accounting data tendency for knowing the
probability of next fact. So, all these things are especially useful
for forecasting. These forecasting may be related with following
things a) sales forecasting b) production forecasting c) earning
forecasting d) cost forecasting
 Advantages
1. It helps in having complete record of business transactions.
2. It gives information about the profit or loss made by the
business at the close of a year and its financial conditions.
3. The basic function of accounting is to supply meaningful
information about the financial activities of the business to
the owners and the managers.
4. It provides useful information form making economic
decisions,
5. It facilitates comparative study of current year’s profit,
sales, expenses etc., with those of the previous years.
6. It supplies information useful in judging the management’s
ability to utilize enterprise resources effectively in achieving
primary enterprise goals. vi) It provides users with factual and
interpretive information about transactions and other events
which are useful for predicting, comparing and evaluation the
enterprise’s earning power.
 Limitations
1. Accounting is historical in nature:.
2. Facts recorded in financial statements are greatly influenced
by accounting conventions and personal judgements of the
Accountant or Management. Valuation of inventory, provision
for doubtful debts and assumption about useful life of an asset
may, therefore, differ from one business house to another.
3. Accounting principles are not static or unchanging-alternative
accounting procedures are often equally acceptable. Therefore,
accounting statements do not always present comparable data.
4. Cost concept is found in accounting. Price changes are not
considered. Money value is bound to change often from time to
time. This is a strong limitation of accounting.
5. Accounting statements do not show the impact of inflation.
6. The accounting statements do not reflect those increase in
net asset values that are not considered realized.