Mangement Accounting

1. INTRODUCTION TO
MANAGEMENT ACCOUNTING

2. CONTENTS
 Management Accounting: Meaning, Features and Scope
 Functions
 Importance
 Differences between Financial Accounting - Cost
Accounting and Management Accounting

3. MANAGEMENT ACCOUNTING: MEANING,
FEATURES AND SCOPE
 The term ‘management accounting’ was first formally
mentioned in 1950 in a report entitled ‘Management
Accounting’, published by the Anglo-American
Council of Productivity Management Accounting
Team after its visit to the United States in the same
year.
 The team in its report defined management
accounting as ‘the presentation of accounting
information in such a way as to assist management in
the creation of policy and in the day-to-day operation
of an undertaking.’

4.  Features of Management Accounting
 It is clear from the above definitions that management accounting is concerned
with accounting data that is useful in decision making. The main
characteristics of management accounting are as follows:
 Useful in decision making: The essential aim of management accounting is
to assist management in decision making and control. It is concerned with all
such information which can prove useful to management in decision making.
 Financial and cost accounting information: Basic accounting information
useful for management accounting is derived from financial and cost
accounting records.
 Internal use: Information provided by management accounting is exclusively
for use by management for internal use. Such information is not to be given to
parties external to the business, like shareholders, creditors and banks.
 Purely optional: Management accounting is a purely voluntary technique and
there is no statutory obligation. Its adoption by any firm depends upon its
utility and desirability.

5.  Scope of Management Accounting
 Traditionally, the subject matter of management accounting mainly consisted
of financial statement analysis and costing theory. As organizations began to
operate in a highly dynamic and complex business environment, they realized
that the existing subject matter of management accounting was insufficient to
meet the challenges of the changing environment. The contemporary subject
matter of management accounting is summarized below:
 Financial Accounting
 Cost Accounting
 Financial Statement
 Budgeting
 Inflation Accounting
 Management Reporting
 Tax Accounting
 Quantitative Techniques

6. FUNCTIONS
 The basic role of management accounting is to provide
accurate and relevant information to the internal parties of
an organization for decision making.
 the major functions are summarized below:
 Data Collection
 Data Processing
 Analysis and Interpretation
 Communication
 Coordinating
 Special Studies
 Tax Administration

7. IMPORTANCE
 The primary objective of a management accounting
system is to provide accurate and relevant information
to internal users with the aim of helping the
management to attain efficiency and effectiveness in
the organization.
 To achieve this goal, management accounting helps an
organization in the process of management which
generally consists of activities like planning,
organizing, evaluating, and communicating.

8. DIFFERENCES BETWEEN FINANCIAL
ACCOUNTING - COST ACCOUNTING AND
MANAGEMENT ACCOUNTING

10.  Distinction Between Cost Accounting and Management
Accounting
 An examination of the meaning and definitions of cost accounting and
management accounting indicates that the distinction between the two
is quite vague.
 Some writers even consider these two areas as synonymous while
others distinguish between the two.
 Horngren, a renowned author on the subject, has gone to the extent of
saying, ‘Modern cost accounting is often called management
accounting.
 Why? Because cost accountants look at their organization through
manager‘s eyes.’
 Thus managerial aspects of cost accounting are inseparable from
management accounting.
 One point on which all agree is that these two types of accounting do
not have clear cut territorial boundaries.

11. THANK YOU