Managrial accountancy

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Managrial accountancy

  1. 1. Managerial Accounting PRESENTED BY BABASAB PATIL
  2. 2. What is Managerial Accounting? <ul><li>Contrast between financial and managerial accounting: </li></ul><ul><ul><li>Financial accounting (keeping books, financial statements, audits, etc.)—reporting to external parties </li></ul></ul><ul><ul><li>Managerial accounting—(budgeting, department reports, production reports, etc.)—needs of internal parties </li></ul></ul>
  3. 3. Contrast between Financial and Managerial Accounting (cont.) <ul><li>Financial accounting </li></ul><ul><ul><li>Focus on past—”results of operations” </li></ul></ul><ul><ul><li>Based on GAAP </li></ul></ul><ul><ul><li>Mandatory reporting with prescribed format (income stmt, balance sheet, etc.) </li></ul></ul><ul><li>Managerial accounting </li></ul><ul><ul><li>Focus on past, present and future (budgeting, planning, controlling, etc.) </li></ul></ul><ul><ul><li>No constraining standards or requirements—whatever management needs </li></ul></ul>
  4. 4. Controlling & the Management Cycle <ul><li>Role of the Controller: </li></ul><ul><ul><li>Chief accounting officer, responsible for reporting and interpreting data needed in management decision-making </li></ul></ul><ul><li>Accounting information & the management cycle: </li></ul><ul><ul><li>Planning—budgeting process </li></ul></ul><ul><ul><li>Controlling—performance reporting, budget to actual, identifying problems requiring management attention </li></ul></ul><ul><ul><li>Organizing & Directing—day to day information </li></ul></ul><ul><ul><li>Decision making—cost/benefit data, etc. </li></ul></ul>
  5. 5. New Management Philosophies & Management Accounting <ul><li>Just-in-time (JIT) operations </li></ul><ul><li>Total quality management (TQM) operations </li></ul><ul><li>Activity based management (ABM) using activity based costing (ABC) models </li></ul><ul><li>GOAL—Continuous improvement </li></ul><ul><ul><li>ISO 9000, Six-Sigma, etc. </li></ul></ul><ul><ul><li>Eliminate waste/ zero defects </li></ul></ul>
  6. 6. Management accounting reports <ul><li>No specified format as in financial acctg –any form useful to management </li></ul><ul><li>Four W’s of Successful Report Presentation: </li></ul><ul><ul><li>Why ? Why is report needed? Purpose? </li></ul></ul><ul><ul><li>Who ? Who will use report? </li></ul></ul><ul><ul><li>What ? What information is relevant? Detail? </li></ul></ul><ul><ul><li>When ? When needed? Timely info? Deadlines? </li></ul></ul><ul><li>Basic purpose of any mgt report—provide useful information to management to aid in planning/controlling/organizing/decisions. </li></ul>
  7. 7. Cost Accounting (intro.) <ul><li>Cost accounting is a key element of management reporting </li></ul><ul><li>Cost classification: </li></ul><ul><ul><li>Cost Traceability—Direct and Indirect costs </li></ul></ul><ul><ul><ul><li>Direct—easily traceable </li></ul></ul></ul><ul><ul><ul><li>Indirect—essential, but not conveniently traced </li></ul></ul></ul><ul><ul><li>Cost Behavior—Fixed and Variable costs </li></ul></ul><ul><ul><ul><li>Fixed—do not fluctuate in relevant range </li></ul></ul></ul><ul><ul><ul><li>Variable—change proportionate to production </li></ul></ul></ul>
  8. 8. Cost Accounting Intro (cont.) <ul><li>Cost Behavior (continued): </li></ul><ul><ul><li>Cost and operations : Value-added and Non value added: </li></ul></ul><ul><ul><ul><li>Value-added —increases market value of product or service </li></ul></ul></ul><ul><ul><ul><li>Non value-added —increases cost but not market value </li></ul></ul></ul><ul><ul><li>Cost and reporting : Product and Period Costs: </li></ul></ul><ul><ul><ul><li>Period costs —non-inventoried, currently used </li></ul></ul></ul><ul><ul><ul><li>Product costs —become part of inventoriable production </li></ul></ul></ul>
  9. 9. Flow of Product Costs: Direct Materials Direct Labor Factory Overhead Work In Process Finished Goods Balance Sheet: Ending Inventory Income Statement: Cost of Goods Sold

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