MANAGEMENT ACCOUNTING UNIT I MEANING MANAGEMENT ACCOUNTING IS

MANAGEMENT ACCOUNTING UNIT -I

MEANING • MANAGEMENT ACCOUNTING IS THE PRESENTATION OF ACCOUNTING INFORMATION IN ORDER TO FORMULATE THE POLICIES TO BE ADOPTED BY THE MANAGEMENT AND ASSIST ITS DAY-TO-DAY ACTIVITIES. • IN OTHER WORDS, IT HELPS THE MANAGEMENT TO PERFORM ALL ITS FUNCTIONS INCLUDING PLANNING, ORGANISING, STAFFING, DIRECTING AND CONTROLLING.

DEFINITION • ACCORDING TO R. N. ANTHONY: “MANAGEMENT ACCOUNTING IS CONCERNED WITH ACCOUNTING INFORMATION THAT IS USEFUL TO MANAGEMENT. ” • THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS, LONDON, HAS DEFINED MANAGEMENT ACCOUNTING AS: “THE APPLICATION OF PROFESSIONAL KNOWLEDGE AND SKILL IN THE PREPARATION OF ACCOUNTING INFORMATION IN SUCH A WAY AS TO ASSIST MANAGEMENT IN THE FORMULATION OF POLICIES AND IN THE PLANNING AND CONTROL OF THE OPERATION OF THE UNDERTAKINGS. ”

CHARACTERISTICS OR NATURE OF MANAGEMENT ACCOUNTING • 1. PROVIDING ACCOUNTING INFORMATION • 2. CAUSE AND EFFECT ANALYSIS • 3. USE OF SPECIAL TECHNIQUES AND CONCEPTS • 4. TAKING IMPORTANT DECISIONS • 5. ACHIEVING OBJECTIVES • NO FIXED NORMS FOLLOWED • 7. INCREASE IN EFFICIENCY • 8. SUPPLIES INFORMATION AND NOT DECISION • 9. CONCERNED WITH FORECASTING

SCOPE OF MANAGEMENT ACCOUNTING • 1. FINANCIAL ACCOUNTING • 2. COST ACCOUNTING • 3. FINANCIAL MANAGEMENT • 4. BUDGETING AND FORECASTING • 5. INVENTORY CONTROL • 6. REPORTING TO MANAGEMENT • 7. INTERPRETATION OF DATE • 8. CONTROL PROCEDURES AND METHODS • 9. INTERNAL AUDIT • 10. TAX ACCOUNTING • 11. OFFICE SERVICES

OBJECTIVES OF MANAGEMENT ACCOUNTING Ø PLANNING AND POLICY FORMULATION Ø HELPFUL IN CONTROLLING PERFORMANCE Ø HELPFUL IN ORGANIZING Ø HELPFUL IN INTERPRETING FINANCIAL INFORMATION Ø MOTIVATING EMPLOYEES Ø HELPFUL IN MAKING DECISIONS Ø REPORTING TO MANAGEMENT Ø HELPFUL IN CO-ORDINATION Ø TAX ADMINISTRATION

FUNCTIONS OF MANAGEMENT ACCOUNTING Ø PLANNING AND FORECASTING Ø MODIFICATION OF DATA Ø FINANCIAL ANALYSIS AND INTERPRETATION Ø FACILITATES MANAGERIAL CONTROL Ø COMMUNICATION Ø USE OF QUALITATIVE INFORMATION Ø CO-ORDINATING Ø HELPFUL IN TAKING STRATEGIC DECISIONS Ø SUPPLY OF INFORMATION

LIMITATIONS OF MANAGEMENT ACCOUNTING • BASED ON ACCOUNTING INFORMATION • LACK OF KNOWLEDGE • INTUITIVE DECISIONS • NOT AN ALTERNATIVE TO ADMINISTRATION • TOP HEAVY STRUCTURE • EVOLUTIONARY STAGE • PERSONAL BIAS • PSYCHOLOGICAL RESISTANCE

RELATIONSHIP BETWEEN MANAGEMENT ACCOUNTING WITH FINANCIAL ACCOUNTING Financial accounting Management accounting object Financial accounting is to record various transactions of a company Management accounting is essential to help management in formulation policies and plans Nature Financial accounting is concerned with the historical data Management accounting deals with projection of data for the future

Subject-matter Financial accounting concern with It is concern with analyzing data from assessing the results of the whole different angles business with different units, departments and cost centers Reporting Financial accounts are prepared to find out profitability and financial condition of the concern Management accounting report are made for internal use only Accounting principles Financial accounts are governed by generally accepted principles and conventions Management accounting is used for taking policy decisions

Period Financial accounts are prepared for a particular period, profit and loss account is generally prepared for one year Management accounting statements are prepared for the benefits of management only and these are not published Audit Financial accounting can be audited Management accounts cannot be audited

RELATIONSHIP BETWEEN COST WITH FINANCIAL ACCOUNTING Cost accounting Management accounting object The object of cost accounting is to record the cost of producing the product or providing a services The purpose of management accounting is to provide information to the management for planning and coordinating the activities of a business scope Cost accounting deals only with cost ascertainment The scope of management accounting is very wide it include financial accounting

Nature Cost Accounting uses both past and present data. Management accounting is concerned with the projection of figures for future like policies and plans, future, guidelines etc. , Data used For cost accounting only the transactions Management accounting uses both are taken which can be expressed in quantitative and qualitative information figures