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Ma 1.1 fundamentals of managerial accounting2
 

Ma 1.1 fundamentals of managerial accounting2

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Describes basics of Managerial accounting, Financial and cost accounting

Describes basics of Managerial accounting, Financial and cost accounting

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    Ma 1.1 fundamentals of managerial accounting2 Ma 1.1 fundamentals of managerial accounting2 Presentation Transcript

    • Module 1 Managerial AccountingManagerial Accounting - Dr. Varadraj Bapat
    • Dr. Varadraj Bapat  Chartered Accountant  Cost Accountant  Ph.D., IIT B, Powai, Mumbai Contact Information: varadraj@som.iitb.ac.inManagerial Accounting - Dr. Varadraj Bapat
    • LEARNING OBJECTIVES  Need to Know About Accounting  Managerial Accounting  Financial Statements - Balance Sheet, Income StatementManagerial Accounting - Dr. Varadraj Bapat
    • Need to Know About Accounting  Need to Know About Accounting and FinanceManagerial Accounting - Dr. Varadraj Bapat
    • “Why do I need to learn about finance … I am very good in my own area of specialization” How would you react to the above statement?Managerial Accounting - Dr. Varadraj Bapat
    • The job content Management As & Finance you Expertise mo ve up .. Functional ExpertiseManagerial Accounting - Dr. Varadraj Bapat
    • About Managerial Accounting  What is Accounting?  Financial Accounting, Cost Accounting and Management Accounting  Financial Accounting and Financial Management  Finance and complexity of organisationManagerial Accounting - Dr. Varadraj Bapat
    • Accounting  Language of Business  Performance is reported and evaluated in financial terms  Knowledge is useful for personal investment and tax planning as wellManagerial Accounting - Dr. Varadraj Bapat
    • Accounting  It is not necessary to become accountant  But its very useful if every one understands the accounting and financial concepts and terminology properlyManagerial Accounting - Dr. Varadraj Bapat
    • Need to Learn Accounting  Itassists in management  Will help in planning, organisation and control of business  Leads to increase in efficiency of business  Profit maximizationManagerial Accounting - Dr. Varadraj Bapat
    • Streams of Accounting  Financial Accounting, Cost Accounting and Management Accounting  Let us understand the similarities and difference in these three streams of accountingManagerial Accounting - Dr. Varadraj Bapat
    • Financial Accounting  Recording of Financial Transactions  Reporting of Financial Results  Preparation of Financial Statements  Targeted to External UsersManagerial Accounting - Dr. Varadraj Bapat
    • Cost Accounting  Recording of Costs  Analysis of Costs  Preparation of Cost Statements  Targeted to Internal UsersManagerial Accounting - Dr. Varadraj Bapat
    • Management Accounting  Recording of Financial & other data  Analysis of Financial and other information  Preparation of Statements for Managerial DecisionsManagerial Accounting - Dr. Varadraj Bapat
    • Management Accounting  Targeted to Internal Users - All levels of Management  This is a broader concept encompasses Financial and Cost AccountingManagerial Accounting - Dr. Varadraj Bapat
    • Meaning of Management Accounting  Any form of accounting which enables a business to be conducted more efficiently can be regarded as Management Accounting. (Institute of Chartered Accountants of India- ICAI)  Management Accounting is theManagerial Accounting - Dr. Varadraj Bapat
    • application of professional knowledge and skill in the preparation of accounting information in such a way as to assist management in the formation of policies and in the planning and control of operations of undertaking. (International Capital Market Association, London- ICMA)Managerial Accounting - Dr. Varadraj Bapat
    • Financial Management  Financial Accounting, Managerial Accounting and Financial Management: Relationship  Financial Management deals with raising and utilization of funds  Raising of funds may include Cost of Capital, Capital StructureManagerial Accounting - Dr. Varadraj Bapat
    • Financial Management decisions, Capital Markets, IPOs and so on  Financial Management deals with raising and utilization of funds  Utilization of funds may include Capital Budgeting, Portfolio Management, Working Capital Management and so onManagerial Accounting - Dr. Varadraj Bapat
    • Managerial V/s Financial Accounting Accounting System (accumulates all accounting data) Managerial Accounting Financial AccountingInformation for decision Published financial making, and control statements and other of an organization’s financial reports. operations. Internal External Users UsersManagerial Accounting - Dr. Varadraj Bapat
    • Complexity of Organisation  Finance and complexity of organisation  As the organizations grow, they become complex  Ownership and Management are separatedManagerial Accounting - Dr. Varadraj Bapat
    • Complexity of Organisation  Ownership is widespread  This increases the importance of Finance functionManagerial Accounting - Dr. Varadraj Bapat
    • About this course  Managerial Accounting Course  The course will cover Financial Accounting, Cost Accounting and Management Accounting  Financial Management is dealt in a different courseManagerial Accounting - Dr. Varadraj Bapat
    • Financial Statements  What are they?  Which are important Financial Statements?  What purposes do they serve?Managerial Accounting - Dr. Varadraj Bapat
    • Company or Organisation PROVIDERS RESOURCES OF FOR MONEY BUSINESS These two are always equalManagerial Accounting - Dr. Varadraj Bapat
    • The Basic Business Model Infrastructure The Money Money Collection Cycle Procurement Billing Value Consumption Addition Delivery Cycle PeopleManagerial Accounting - Dr. Varadraj Bapat
    • Infrastructure Money Collection Costs Procurement Billing Consumption Delivery To be profitable, our revenue should be more than our cost ! This would make the organisation stronger, healthy and long-lasting.Managerial Accounting - Dr. Varadraj Bapat
    • Balance Sheet Profit & Loss Account Liabilities Assets Infrastructure Revenue Capital Costs Fixed Assets MoneyBorrowings from Collection Banks / FIs Current Assets Procurement or Working Outstanding Current & Inventory Capital Liabilities Consumption Profit/ Loss Delivery & & WIP Human Assets Billing People Balance Sheet shows the financial position of organisation, while Profit & loss Account shows the profitability of organisation. Managerial Accounting - Dr. Varadraj Bapat
    • Balance Sheet shows the cumulative position of resources (assets) and sources of funds (liabilities) at the end of the year. Profit & Loss Account shows ‘Revenue & Cost’ performance during a quarter/ year.Managerial Accounting - Dr. Varadraj Bapat
    • Balance Sheet Profit & Loss AccountLiabilities Assets Infrastructure Revenue Capital Costs Reserves Fixed Assets Money Borrowings Collection(eg.from Banks) Current Assets or Working Procurement Outstanding Current Capital & Inventory Liabilities Consumption Profit Delivery & & WIP Human Assets Billing People Profits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing. Managerial Accounting - Dr. Varadraj Bapat
    • Balance Sheet Profit & Loss AccountLiabilities Assets Infrastructure Revenue Capital Costs Fixed Assets Reserves Money Borrowings Collection Current Assets(eg.from Banks) or Working Procurement Capital Outstanding Current & InventoryLiabilities Consumption Profit Delivery & Human Assets & WIP Billing People Profits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing. Managerial Accounting - Dr. Varadraj Bapat
    •  Balance sheet may be prepared at any time showing the position as on that date.  Profit and loss account may be prepared for any particular period.Managerial Accounting - Dr. Varadraj Bapat
    • Balance Sheet  Owners Funds  Fixed Assets  Non Current  Non Current liabilities Investments  Current  Other non liabilities current assets  Current AssetsManagerial Accounting - Dr. Varadraj Bapat
    • The Annual Report Usually Contains ... – financial statements which consist of • Balance sheet, Profit & Loss A/c • Cash Flow Statements • notes to the financial statements • disclosure of accounting policiesManagerial Accounting - Dr. Varadraj Bapat
    • The Annual Report Usually Contains ... - Chairman’s Statement - Board of Directors & Committees - Directors Report - Directors Responsibility Statement - Auditors Report - Report on Corporate GovernanceManagerial Accounting - Dr. Varadraj Bapat
    • The Annual Report Usually Contains ... - Disclosure regarding Employee Stock options Schemes - List of employees receiving remuneration exceeding Rs. 60 Lakhs - Conservation of Energy ReportsManagerial Accounting - Dr. Varadraj Bapat
    • The Annual Report Usually Contains ... - Consolidated Financial Statements - Subsidiaries Financial Statements - Management Discussion and Analysis - Annual General Meeting NoticeManagerial Accounting - Dr. Varadraj Bapat