MANAGEMENT ACCOUNTING BASIC CONCEPTS

1. PROF. V. GURUMOORTHI
DEPT. OF COMMERCE
KASC.
09.12.2016

2. ACCOUNTING
• Accounting means, the art of recording,
classifying, summarizing, and interpretation
the business transaction which related to
money value.

3. BRANCH OF ACCOUNTING
FINANCIAL
ACCOUNTING
COST ACCOUNTING
MANAGEMENT
ACCOUNTING
Ascertain profit
& loss and
indicate financial
position of the
business.
To know the
COST of
Production/ per
unit.
Helps to the
manager to take
managerial
decision based on
Financial & Cost
accounting Data.

4. INTRODUCTION OF MANAGEMENT
ACCOUNTING
(ORIGIN)
Management accounting is Recent Origin.
The term was first used in 1950 by a term of
accounts visiting USA under the auspices of
Anglo-American Council on productivity.

5. MEANING OF MANAGEMENT
ACCOUNTING
• Management accounting is the process of
identification, measurement, preparation, analyze,
interpretation and communication of financial
information used by management to take various
decisions for the enterprise.
• Management accounting provides necessary financial
information to the managers and to take proper and
effective decisions.
• It provides information to all stakeholders of a
company.

6. Managerial decisions
• Make or Buy
• Dropping or Adding Product Line
• Purchase or Lease
• Selling Agents or Sales Force
• Product Mix
• Price Mix
• Promotion Mix

7. DEFINITION
• “ Management Accounting is concerned with accounting
information that is useful to management.”- Robert Anthony
• “ Management Accounting is concerned with supplying
financial data useful to management at all levels in managing
and administering an enterprise.”- W.B. Meferland

8. Nature of Management Accounting
1. Providing Financial
Information
2. Cause and Effect
Analysis.
3. Use of special techniques
& Concepts.
4. Decision Making.
5. No fixed
Conventions/Procedures.
6. Achievement of
Objectives.
7. Improving Efficiency
8. Forecasting
9. Providing of Information
and not Decisions.

9. •Financial Accounting
Financial accounting forms the basis for analysis and interpretation for
furnishing meaningful data to the management.
•Cost Accounting
Cost accounting is the process and techniques of ascertaining cost.
Planning, decision making and control are the basic managerial
functions.
•Budgeting And Forecasting
Budgeting means expressing the plans, policies and goals of the firm for
a definite period in future. Forecasting on the other hand, is a prediction
of what will happen as a result of a given set of circumstances.
Scope of Management Accounting

10. • Inventory Control
Inventory is necessary to control from the time it is acquire till its final
disposal as it involves large sum. The inventory control technique will be
helpful for taking managerial decisions.
• Statistical Analysis:
In order to make the information more useful, statistical tools are applied.
These tools include charts, graphs, diagrams, index numbers, etc…
• Analysis of Data:
Financial statements are analyzed and compared with past statement or
other firm’s statements.
• Internal Audit:
Internal audit helps the management in fixing individual responsibility for
internal control.

11. 1. Presentation of Data
2. Aid of planning and forecasting
3. Help in organizing
4. Decision Making
5. Effective Control
6. Communication of Management Policies
7. Effective Control
8. Incorporation of Non-Financial Information
9. Coordination
10. Motivating employees
Functions of Management Accounting

12. 1. Increase in efficiency
2. Effective Planning
3. Performance Evaluation
4. Profit Maximization
5. Reliability
6. Elimination of Wastages
7. Effective
Communication
8. Employee Morale
9. Control & Co-ordination
Advantage
1. Dependence for basic
Records
2. Personal Bias
3. It is only a Tool
4. Provides only Data
5. Need Experts
6. Costly to Install
Disadvantage

13. FINANCIAL
Accounting
COST
Accounting
MANAGEMENT
Accounting
Financial
Accounting
summarize
transactions taking
place during a
period with the
objective of
preparing the
financial
statements.
Cost
Accounting
summarized
data and total
cost incurred
during a
period.
It provides
financial
information
(analyzed) to the
manager to take
managerial
decision based on
financial & cost
accounting data

14. Nature FINANCIAL
ACCOUNTING
MANAGEMENT
ACCOUNTING
PURPOSE To ascertain Profit & Loss by
preparing P&L A/c and reveal
the financial position through
Balance Sheet.
To provide information to the
management for decision making on
internal operations.
FOCUS It recording past transactions.
(Historical Data)
It focus Management’s future plans.
ANALYZE OF DATA Financial accounting provides
consolidate information of the
whole enterprise.
It evaluate performance of different
department, divisions and as per the
requirement of management.
LEGAL
REQUIREMENTS
It has become compulsory as
per the statutory requirements.
It is of voluntary adoption by the
management to function effectively.

15. NATURE FINANCIAL
ACCOUNTING
MANAGEMENT ACCOUNTING
PRINCIPLES AND
PROCEDURES
It based on accounting
concepts and conventions.
It has no any rigid principles.
FORMAT OF
STATEMENTS
It has various financial
statements based on revenue,
capital, personal and real
accounts.
In its only income and
expenses based statements.
AUDIT In financial accounting audit is
compulsory by chartered
accountant.
In management accounting
there is no compulsory audit.
May be in internal audit done
by manager.
REPORTING In financial accounting reports
given end of the financial year.
Produce reports frequently.

16. Nature COST
ACCOUNTING
MANAGEMENT
ACCOUNTING
PURPOSE To ascertain and control the
cost of products or services.
To provide information to
management for efficient decision
making.
EMPHASIS It is based on both historical and
present data.
It deals with future projections
based on historical and present
cost data.
PRINCIPELS AND
PROCEDURES
Established procedures and
practice are followed in cost
accounting.
No such prescribed practice are
followed in it.
DATA USED It uses only quantitative
information.
It uses both qualitative and
quantitative information.
SCOPE It is concerned mainly with cost
ascertainment and control.
It has wide scope. Includes,
financial accounting, cost
accounting, budgeting… ect.

17. MANAGEMENT ACCOUNTANT
• Management accountant is a person who is
entrusted with management accounting.
• He is also known as “Controller of accounts”.
• He plays a significant role in decision making in
an organization.

18. RESPONSIBILITIES & DUTIES
• The installation & interpretation of all accounting records of the
company.
• The preparation and interpretation of the financial statements of the
company.
• The compilation of production costs.
• The taking and costing of all physical inventories.
• Continuous audit of all accounts and records of the company
wherever located.
• The preparation and filing of tax returns.
• The maintenance of records of all contracts and leases.

19. FUNCTIONS OF MANAGEMENT ACCOUNTANT
• To establish, coordinate and administer an adequate plan
for the control of operations.
• To compare performance with standards and to report
and interpret its results to all levels of management.
• To administer tax policies and procedures.
• To supervise preparation of reports to Government
agencies.
• To assure protection of assets of the company through
internal control or insurance coverage.
• To provide regular information and updates to the
management on various issues, so as to help the
management take timely and correct decisions.

20. MANAGEMENT ACCOUNTING : TOOLS AND
TECHNIQUES
A. TOOLS BASED ON
FINANCIAL ACCOUNTING
C. TOOLS BASED ON BUDGETING
AND FORECATING
B. TOOLS BASED ON COST
ACCOUNTING
D. TOOLS BASED ON
MATHEMATICS
MANAGEMENT
ACCOUNTING:
TOOLS &
TECHNIQUES

21. A. TOOLS BASED ON FINANCIALACCOUNTING
Common Size
Statement
Comparative
Statement
Ratio Analysis
Fund Flow
Statement
Cash flow
Statement

22. B. TOOLS BASED ON COST ACCOUNTING
Cost Volume Profit Analysis
Standard Costing
Contribution
Break-Even Point
Marginal Costing
Differential Costing

23. C. TOOLS BASED ON BUDGETING AND FORECASTING
Business
Forecasting
Budgeting
Project
Evaluation (
PERT &
CPM)
PERT- PROGRAMME EVALUATION AND REVIEW TECHNIQUE
CPM – COST PER THOUSAND IMPRESSIONS

24. D. TOOLS BASED ON MATHEMATICS
Correlation Analysis
Regression Analysis
Time Series Analysis
Trend Analysis
Operations Research
Simulation Theory

25. SOCIAL MESSAGE
Save tree’s soul,
It will save your FUTURE family’s
soul…….