INTRODUCTION OF MANAGEMENT
ACCOUNTING
Presented By:KAMALPREET KAUR
ASSISTANT PROFESSOR IN COMMERCE
GCCBA--42
MANAGEMENT ACCOUNTING
The Institute of Cost and Works
Accountants of India(ICWAI)
has defined management
accounting as a system of
collection and presentation of
relevant
economic
information relating to an
enterprise
for
planning,
controlling and decision
making.
CHARACTERISTICS OF
MANAGEMENT ACCOUNTING
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Useful of decision making
Financial and cost accounting information
Internal use
Purely optional
Concerned with future
Flexibility in presentation of information
SCOPE OF MANAGEMENT
ACCOUNTIING
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Financial accounting
Cost accounting
Budgeting and forecasting
Tax planning
Reporting to management
Cost control procedures
Statistical tools
Internal control and internal audit
Financial analysis and interpretation
Objectives of management
accounting
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Planning and policy formulation
Helpful in controlling performance
Helpful in organizing
Helpful in interpreting financial information
Helpful in making decisions
Reporting to management
Helpful in co-ordination
Helpful in tax administration
FUNCTIONS OF MANAGEMENT
ACCOUNTING
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Planning
Coordinating
Controlling
Communication
Financial analysis and interpretation
Qualitative information
Tax policies
Decision making
Tools & Techniques of Management
Accounting
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Financial Management Analysis
Comparative financial statements
Ratio analysis
Fund flow statement
Trend analysis
CVP analysis
Cash Flow Analysis
Tools & Techniques of Management
Accounting
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Budgetary Control
Standard costing
Marginal costing
Responsibility accounting
Price level accounting
Human resource accounting
Social cost benefit analysis
Importance of management
accounting
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Increases efficiency
Proper planning
Measurement of performance
Maximizing profitability
Improve service to customers
Effective management control
LIMITATIONS OF
MANAGEMENT ACCOUNTING
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Based on historical data
Lack of wide knowledge
Complicated approach
Costly system
Developing stage
Lack of objectivity
DIFFERENCE BETWEEN
FINANCIAL ACCOUNTING
AND MANAGEMENT
ACCOUNTING
BASIS
FINANCIAL
ACCOUNTING
MANAGEMENT
ACCOUNTING
External and internal
users
Information is for external
users like
investors,creditors,govt.etc.
Information is mainly for
internal users i.e.
management.
Accounting Method
Based on Double entry
system
Not based on Double entry
system
Statutory requirements
Obligatory to satisfy various Optional
statutory provisions
Analysis of cost and profit
Shows profit & loss of the
business as a whole.
Provide information about
individual products, plants
etc.
Past and future data
Represents past and
historical trends
Future oriented may use
past data for future
projections
Periodic and continuous
reporting
Financial reports are
prepared every year
Reports are prepared
frequently
BASIS
FINANCIAL
ACCOUNTING
MANAGEMENT
ACCOUNTING
Accounting Standards
Follows accounting
standards
Management accounting is
not bound by accounting
standards
Types of statements
prepared
General purpose statements Special purpose reports are
are prepared
prepared
Publication and audit
Published for general
public and audited by
chartered accountants
Neither published for
general public nor audited
by chartered accountants
Monetary and nonmonetary measurements
Provides information in
terms of money only
May apply monetary or non
monetary units of
measurement