PARAMJIT SHARMA
Fundamentals
PARAMJIT SHARMA
Financial
Accounting
Cost
Accounting
Management
Accounting
The art of Recording, Classifying,
And summariz...
PARAMJIT SHARMA
What Would Be The Role Of Financial Accounting ?
What Would Be The role Of Cost Accounting ?
What Would Be...
PARAMJIT SHARMA
Reducing Cost of the car by INR 10,000
Manufacturing & Marketing Cars
PARAMJIT SHARMA
Fundamentals
Financial Accounting-
meaning & limitations
FA is concerned with
RECORDING,
CLASSIFYING AND...
PARAMJIT SHARMA
FundamentalsFinancial Statements
PROFIT & LOSS
ACCOUNT
BALANCE-SHEET
STATEMENT OF
SOURCES &
APPLICATIONS O...
PARAMJIT SHARMA
FundamentalsFinancial Accounting- limitations
HISTORICALHISTORICAL ONLY NET RESULTSONLY NET RESULTS
NO CON...
PARAMJIT SHARMA
Management
Accounting
PARAMJIT SHARMA
Management Accounting
• A field of accounting that provides
economic and financial information for
manager...
PARAMJIT SHARMA
Activities include:
• Explaining manufacturing and non
manufacturing costs and how they are reported
in th...
PARAMJIT SHARMA
Activities include (continued):
• Assisting management in profit planning and
budgeting
• Providing a basi...
PARAMJIT SHARMA
COMPARING MANAGEMENT
AND FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
External Users;
Stockholders, Creditors...
PARAMJIT SHARMA
FundamentalsFew Terms - clarification
COST ACCOUNTANCY
COSTING
COST ACCOUNTING
PARAMJIT SHARMA
FundamentalsFew Terms - clarification
COST ACCOUNTANCY
It is the application of Costing and Cost Accounti...
PARAMJIT SHARMA
FundamentalsCOST ACCOUNTING- introduction
The Process of accounting for costs from the
Point at which expe...
PARAMJIT SHARMA
FundamentalsFew Terms - clarification
COSTING
•Technique and process of ascertaining costs
•Classifying, ...
PARAMJIT SHARMA
Costing Objectives
Setting
Price
Ascertaining
cost
Cost
Review
Cost
Control
Operating
Decisions
PARAMJIT SHARMA
Fundamentalsdecision making
PRICE
PROFIT
MAKE OR
BUY
CAPACITY
EXPORT
PRICE
OPERATE
OR
SHUT
SALES
VOLUME
NE...
PARAMJIT SHARMA
FundamentalsCost Accounting- principles
1. A cost is related to cause- rent of factory charged to factory
...
PARAMJIT SHARMA
FundamentalsCost/Financial Accounting- differences
Need
Purpose
Recording
Profit
Analysis
Contents
Compuls...
PARAMJIT SHARMA
FundamentalsCost/Financial Accounting- differences
Periodicity
Control
Nature
Valuation
Once/twice Daily/w...
PARAMJIT SHARMA
FundamentalsManagement/Cost Accounting- differences
Derivation Of Data
Information Provided
Emphasis
P...
PARAMJIT SHARMA
FundamentalsCost Accounting- advantages
Supplies Detailed Cost Information
Helps in Price Fixation
Reve...
PARAMJIT SHARMA
FundamentalsCost Accounting- Objections
It is Unnecessary
It is Inapplicable
It is a failure
Mere matt...
PARAMJIT SHARMA
Price …..Quality ….Strategies
Price
ProductQuality
High Med low
H
M
L
1
Premium
Strategy
2
High value
stra...
PARAMJIT SHARMA
Fundamentals
Costing Methods
Job Costing
Batch Costing
Contract Costing
Process Costing
Unit Costing
...
PARAMJIT SHARMA
FundamentalsCosting Techniques
Historical Costing
Standard Costing
Marginal Costing
Absorption Costing...
PARAMJIT SHARMA
FundamentalsInstallation Of Costing System
•Nature Of Business
•Structure of Organization
•Objectives and ...
PARAMJIT SHARMA
FundamentalsInstallation Of Costing System-difficulties
•Lack Of Management Support
•Resistance Of Staff
•...
PARAMJIT SHARMA
Fundamentals
Time for Questions
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    1. 1. PARAMJIT SHARMA Fundamentals
    2. 2. PARAMJIT SHARMA Financial Accounting Cost Accounting Management Accounting The art of Recording, Classifying, And summarizing in terms of money ,transactions and events which are of financial Nature, and interpreting the results thereof Accounting
    3. 3. PARAMJIT SHARMA What Would Be The Role Of Financial Accounting ? What Would Be The role Of Cost Accounting ? What Would Be Role Of Management Accounting ? Manufacturing & Marketing Cars
    4. 4. PARAMJIT SHARMA Reducing Cost of the car by INR 10,000 Manufacturing & Marketing Cars
    5. 5. PARAMJIT SHARMA Fundamentals Financial Accounting- meaning & limitations FA is concerned with RECORDING, CLASSIFYING AND SUMMARISING financial transactions in accordance with the generally accepted Accounting Principles Journal Ledger Trial Balance Final Statements
    6. 6. PARAMJIT SHARMA FundamentalsFinancial Statements PROFIT & LOSS ACCOUNT BALANCE-SHEET STATEMENT OF SOURCES & APPLICATIONS OF FUNDS
    7. 7. PARAMJIT SHARMA FundamentalsFinancial Accounting- limitations HISTORICALHISTORICAL ONLY NET RESULTSONLY NET RESULTS NO CONTROL ON COST NO CONTROL ON COST NO DISTINCTION Direct & Indirect NO DISTINCTION Direct & Indirect Inadequate Information For PRICE FIXATION Inadequate Information For PRICE FIXATION NO COMPARISON OF COSTS NO COMPARISON OF COSTS NO STANDARDS TO Assess Performance NO STANDARDS TO Assess Performance
    8. 8. PARAMJIT SHARMA Management Accounting
    9. 9. PARAMJIT SHARMA Management Accounting • A field of accounting that provides economic and financial information for managers and other internal users.
    10. 10. PARAMJIT SHARMA Activities include: • Explaining manufacturing and non manufacturing costs and how they are reported in the financial statements • Computing the cost of providing a service or manufacturing a product • Determining the behavior of costs and expenses as activity levels change • Analyzing cost-volume profit relationships within a company MANAGEMENT ACCOUNTING BASICS
    11. 11. PARAMJIT SHARMA Activities include (continued): • Assisting management in profit planning and budgeting • Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs • Accumulating and presenting relevant data for management decision making MANAGEMENT ACCOUNTING BASICS
    12. 12. PARAMJIT SHARMA COMPARING MANAGEMENT AND FINANCIAL ACCOUNTING FINANCIAL ACCOUNTING External Users; Stockholders, Creditors Regulators Financial Statements Quarterly & Annually General Purpose Pertains to Business as Whole Limited to Double Entry Acct, Cost Data GAAP/IAS Audit By CA Primary users Of Reports Types & Frequency Of Reports Purpose of Reports Contents of Reports Verification Process MANAGEMENT ACCOUNTING Internal Users: Managers Directors Internal Reports As Frequently Required Special Purpose for Specific Decisions Pertains To some sub unit of Business Very Detailed Extend beyond DE Accounting Standard is relevance to Decision No independent Audits
    13. 13. PARAMJIT SHARMA FundamentalsFew Terms - clarification COST ACCOUNTANCY COSTING COST ACCOUNTING
    14. 14. PARAMJIT SHARMA FundamentalsFew Terms - clarification COST ACCOUNTANCY It is the application of Costing and Cost Accounting Principles, Methods and Techniques to the science, art and practice of Cost Control and the ascertainment of profitability. It includes the presentation of information derived there from for the purpose of Managerial Decision Making It is the application of Costing and Cost Accounting Principles, Methods and Techniques to the science, art and practice of Cost Control and the ascertainment of profitability. It includes the presentation of information derived there from for the purpose of Managerial Decision Making
    15. 15. PARAMJIT SHARMA FundamentalsCOST ACCOUNTING- introduction The Process of accounting for costs from the Point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centers and cost units Books Of Cost Accounts Cost Centers
    16. 16. PARAMJIT SHARMA FundamentalsFew Terms - clarification COSTING •Technique and process of ascertaining costs •Classifying, recording and appropriate allocation of Expenditure for determination of costs of products ( Watch, TV, Computers) or services (Electricity, telephone, Transport Etc)
    17. 17. PARAMJIT SHARMA Costing Objectives Setting Price Ascertaining cost Cost Review Cost Control Operating Decisions
    18. 18. PARAMJIT SHARMA Fundamentalsdecision making PRICE PROFIT MAKE OR BUY CAPACITY EXPORT PRICE OPERATE OR SHUT SALES VOLUME NEW MODEL
    19. 19. PARAMJIT SHARMA FundamentalsCost Accounting- principles 1. A cost is related to cause- rent of factory charged to factory 2. A cost is charged after it has been Incurred-no selling cost to unsold stock 3. Abnormal costs are excluded – loss due to fire accident 4. Conservatism Concept ignored in Cost Accounting- stock valued at cost only 5 Principle of Double entry applied to cost accounting too
    20. 20. PARAMJIT SHARMA FundamentalsCost/Financial Accounting- differences Need Purpose Recording Profit Analysis Contents Compulsory Obligatory Final Results to stake Holders Subjective Recording Total Profit/Loss External Transactions Cost Information Objective Recording Product wise Internal FA CAFactor
    21. 21. PARAMJIT SHARMA FundamentalsCost/Financial Accounting- differences Periodicity Control Nature Valuation Once/twice Daily/weekly/monthly Inadequate Historical Cost or market System at Place Historical/Predetermined Cost Price FA CAFactor
    22. 22. PARAMJIT SHARMA FundamentalsManagement/Cost Accounting- differences Derivation Of Data Information Provided Emphasis Purpose Planning Techniques Installation •Cost/Financial Acct •Cost/Fin. Information CVP/Fin Ratios •Decision Making •Planning, Decision M & Control •Short/Long Term •RA,FF, C Flow •Not possible without CA system Data From CA Only Cost Inf. Cost Ascertainment & Control Reporting Cost Short Term Variable Costing, Budgetary Control etc Can Be Installed Without CA factor MA CA
    23. 23. PARAMJIT SHARMA FundamentalsCost Accounting- advantages Supplies Detailed Cost Information Helps in Price Fixation Reveals UN (Profitable) Activities Reveals idle capacity Assist in Controlling Costs Helps in decision Making Facilitates Cost Comparison Helps in Inventory Control
    24. 24. PARAMJIT SHARMA FundamentalsCost Accounting- Objections It is Unnecessary It is Inapplicable It is a failure Mere matter of Forms and Ruling It is Expensive
    25. 25. PARAMJIT SHARMA Price …..Quality ….Strategies Price ProductQuality High Med low H M L 1 Premium Strategy 2 High value strategy 3 Super value strategy 4 Overcharging strategy 5 Medium Value Stg. 6 Good value Strategy 7 Rip off Strategy 8 False Econ. Strategy 9 Economy Strategy
    26. 26. PARAMJIT SHARMA Fundamentals Costing Methods Job Costing Batch Costing Contract Costing Process Costing Unit Costing Operation Costing Operating Costing Multiple Costing
    27. 27. PARAMJIT SHARMA FundamentalsCosting Techniques Historical Costing Standard Costing Marginal Costing Absorption Costing Direct Costing Uniform Costing
    28. 28. PARAMJIT SHARMA FundamentalsInstallation Of Costing System •Nature Of Business •Structure of Organization •Objectives and Expectations •Cooperation and support Of staff •Standardization of Forms •Prompt Reporting •Flexibility •Reconciliation of FA & CA •Current Practices •Simplicity
    29. 29. PARAMJIT SHARMA FundamentalsInstallation Of Costing System-difficulties •Lack Of Management Support •Resistance Of Staff •Non Cooperation From Other Levels •Shortage Of Trained Staff •Heavy Cost Of Operating The System
    30. 30. PARAMJIT SHARMA Fundamentals Time for Questions

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