Download
1 / 24
240 likes | 312 Vues
MANAGEMENT ACCOUNTING PRESENTED BY M.PITCHAIMANI, M.Com;M.Phil;M.B.A.
E N D
MANAGEMENT ACCOUNTINGPRESENTED BYM.PITCHAIMANI, M.Com;M.Phil;M.B.A.
MANAGEMENT ACCOUNTINGMeaning:Accounting for themanagement. It provides necessary information to assist the management in the creation of policy and in day today operations.It enables the management to discharge all its functions.
DEFINITION:1.According to R.N.Anthony.“Management accounting is concerned with accounting information's to the management”
2.American Council of productivity: “Management accounting is the presentation of accounting in such a way to assist the management in the creation of policy and in day today operations of an undertaking”
OBJECTIVES • To assist the management in promoting efficiency. • To prepare budgets covering all functions of a business. • To analyse monetary & non monetary transactions. • To compare the actual performance with plan & identifying variations and its causes. • To interpret the financial statements to formulate future policies. • To submit the results to the management at frequent intervals. • To provide a suitable organisation for discharging responsibilities. • To arrange systematic allocation of responsibilities for the implementation of plans & budgets.
SCOPE & FUNCTIONS The scope of management accounting is very wide.It includes with in its fold all aspects of business operations. The following areas indicating scope of management accounting. • Financial accounting: It provides historical information. It forms basis for future.securing full control & coordination of a business. • Cost accounting: It provides various techniques of costing.It assisting the mgt in the formulation of policies & the operations of the undertakings.
Budgetary control: It helps to compare the actual performance with budgeted performance,measuring variations finding out their causes & suggesting remedial measures. • Inventory control: It is concerned with control over inventory from the time it is received till its disposal. • Reporting: It includes preparation of periodical income statements & other related reports like fund flow statements & cash flow statements.these statements helps to the management to evaluation of performance & decision making.
Statistical methods: Statistical tools like graphs,charts,index numbers etc.are used for presentation of information to various departments. • Taxation: It includes preparation of income statement,assessing the effect of tax on capital expenditure,proposal & pricing. • Methods and procedures: They deal with organisational methods for cost reduction,procedures for improving the efficiency of accounting & office operations. • Internal audit: This refers to the establishment of a suitable internal audit system for internal control. • Office services: They cover a wide range of activities like data processing,filing, copying,printing,communication etc.
FUNCTIONS: • Functions of management accounting. It includes all activities connected with collecting,processing,interpreting and presenting information to the management.main functions are listed below: • Forecasting: Making short term & long term forecast and planning the future operations of the business. • Organising: Organising human & physical resources of the business.it is done by assigning specific responsibilities to different people. • Co-ordinating: Providing different tools of coordination like budgeting,financial reporting,financial analysis and budgetary control.
Controlling: controlling performance by using standard costing, variance analysis and budgetary control. • Analysing and interpreting: Analysing and interpreting of data in a simple and purposeful manner. • Communicating: Communicating the results of business activities through prompt and accurate reporting system. • Economic appraisal: appraising of social and economic forces and government policies and interpreting their effect on business.
Advantages:Helps in decision making.It helps to take decisions relating to fixing prices,make or buy decision,acceptance of additional orders,selection of suitable product mix etc;These decisions are taken with the help of marginal costing.Helps in planning.Planning includes profit planning,preparation of budgets,programs of capital investment and financing.These plans are taken with the help of budgetary control,capital budgeting and cost volume profit analysis.Facilitates communication.It provides with up-to-date information by means of periodical reports.These reports assist management in evaluation of performance and control.
Helps in Coordinating. This facilitates clear definition of departmental goals and Coordination of their activities.( relationship among various depts. in a orgn ) Interpretation of financial information.It presents information in a simple and purposeful manner. It facilitates quick decision making. Economic appraisal.It includes appraisal of social,economic forces and government policies. It helps the management in assessing their impact on the business. Improving efficiency.It is a convenient tool to improve the performance.With the help of ratios and budgets all the departmental activities can be improved and maintained.It assists the management in location of weak spots ( sick areas ) and in taking corrective actions
Limitations:Based on accounting information:It derives information from past accounting records,If the past records are not reliable it will affect the effectiveness of management accounting. Wide scope:It has a very wide scope incorporating many disciplines.This results in inaccuracy and other practical difficulties.Costly:The system installation is difficult in respect of small scale organisations.Hence it is very costly and only big concerns can offered to adopt it.
Evolutionary stage:Management accounting is still in its initial stage.Tools and techniques are not fully developed.this creates doubts about the utility of management accounting.Opposition to change:This system requires a number of changes in the organisation structure,rules and regulations.this arrangement is not generally liked by the people involved. Intuitive decisions:It helps in scientific decision making.yet,because of simplicity and personal factors the management has a tendency to arrive at decision by intuition.Not an alternative to management:It will not replace the management and administration.It is a tool of the management.Decisions are of the management and not of the management accountant.
Difference between Management accounting & Financial accounting • Objective • Performance Analysis • Data Used • Nature • Accuracy • Legal Compulsion • Monetary Transactions • Control
Management accounting Management accounting is to provideinformation for internal use of the management.(Depts.,Mgt) It analyses the performance and profitability of each department.(Individually) It is mainly concerned with future plans and policies. It is based on judgment and more subjective. Financial accounting Financial accounting is to provideinformation for external use of the management(Sh.hol,Crs,Govt). It is concerned with overall performance of the concern.(Totally) It is mainly concerned with recording of past transactions. It is based on measurement and more objective. Difference between management accounting and financial accounting
Approximations are widely used.Because most of the information is related to the future and intended for internal use. Preparation of accounts is optional. It records both monetary as well as non monetary events called technical changes, government policies. It reveal the deviations of actual and budgeted.It will also indicate the causes for such deviations Accuracy is an important factor. Because all the information is related to the past and intended for external use. It is compulsory for all joint stock companies. It records only those transactions which can be expressed in terms of money. It will not reveal whether plans are properly implemented.
Objective Scope Data used Nature Difference between Cost accounting and management accounting.
Cost accounting The ascertainment and control of costs of products and services It deals primarily with cost data.It includes the process of accumulation, classification,analysis and recording.The scope of cost accounting is limited. management accounting The supply of informationto the management to take decisions,planning and control. It deals with both cost and revenue.It includes financial,cost,budgeting, reporting,to management and interpretation of financial data. The scope of management accounting is wider. Difference between Cost accounting and management accounting.
In cost accounting only those transactions which can be expressed in figures are taken.i.e.quantitative aspect is recorded in cost accounting. Cost accounting uses both past and present figures. In management accounting the transactions which can be expressed in figures and values are taken. i.e.Both quantitative and qualitative aspects are recorded in management accounting. Management accounting is concerned with the projection of figures for future
Functions of Management Accountant:The Management Accountant is an officer entrusted with the Management Accounting functions in an organization. His designation and position from company . In a large companies his designation may be chief accountant, controller,financial controller etc. He is a staff official. He acts in close coordination with the cost accountant,the internal auditor and the general accountant. The following are the functions of the management accountant.1. Planning for control: Management accountant establishes,coordinates and maintains an integrated plan for control of operations. Such a plan includes profit planning,sales forecast,expense budgets,cost standard etc.
2.Evaluation of performance:He should evaluate various policies and programmes. The effectiveness of planning and procedures to attain the objectives of the organisation depends upon the caliber of the management accountant.3.Reporting: He has to compare the actual performance with plans and standards. The results of the operations to be interpreted and reported to all levels of management. This done through compilation of accounting records, statistical records and reports
4. Tax Administration:He supervises all matters relating to tax accounting. The management accountant advices the management regarding the effect of taxation on capital expenditure proposals and tax planning.5. Protection of Assets: It is another function of a management accountant. It is performed through the maintenance of internal control, auditing and proper insurance coverage to assets.6. Appraisal of external effects:He is assess the effects of various economic and fiscal policies of the government. He has interpret to the management their effects on business.
