What are the Management tools and Accounting tools to help Companies be more efficient in competing with others

1. Tools & Techniques of
Management Accounting

2. QUOTE OF THE DAY
EVERYTHING CHANGES EXCEPT FOR
THE CHANGE ITSELF
(ANONIMUOS SOURCE)

3. BACKGROUND
• MANAGER ARE GIVEN A ROLE TO
PLAN TO ACHIEVE WHAT IS IT TO BE
THE COMPANY TARGET
• COST CENTER PROVIDES
INFORMATION ON WHAT ARE THE
COST STRUCTURE OF THE COMPANY
• MANAGEMENT ACCOUNTING TOOLS &
TECHNIQUE IS NEEDED TO ASSIST IN
DECISION MAKING PROCESS

4. PROBLEM ANALYSIS
• THE NEED OF ACCOUNTING
INFORMATION FOR EACH LEVEL IS
DIFFERENT
• FINANCIAL INFORMATION IS NOT
ENOUGH FOR MANAGER TO MAKE
DECISION
• HOW MANAGEMENT RESPONSE FOR
A NEED IN FINANCIAL INFORMATION
IN AN COMPLEX, RAPID CHANGES
ENVIRONMENT

5. THEORITICAL BASIS
• PRESSURE UPON MANAGEMENT
ACCOUNTING AND ENVIRONMENT
• FAST CHANGES IN TECHNOLOGY
CHANGES THE COST STRUCTURE IN
THE COMPANY

6. THEORITICAL BASIS
• THEORIST STATED THAT ORGANIZATION
STRUCTURAL ARRANGEMENT CAN BE
SUCCESFULLY CHANGE WITH THE
IMPELEMENTATION OF EITHER INCREMENTAL OR
RADICAL ADAPTIVE STRATEGIC CHANGE
• INSTITUTIONAL APPROACH TO ORGANIZATIONAL
CHANGES SUGGEST THAT ORGANIZATION
STRUCTURE AFFECTS AN ORGANIZATION
LEARNING STRATEGY AND ABILITY TO ADAPT THE
CHANGES IN EXTERNAL ENVIRONMENTAL

7. Financial Policy and Accounting
• Firms has to take decisions about
sources of raising funds.
• It helps in consideration of all the related
factors and evaluate current and future
problems at the spot.
• Issue of share capital or raising of loans.
• Proportion between share capital and
loans are to be decided.
• Management accounting provides
techniques for financial planning.

8. Financial Accounting Management Accounting
Purpose Communication of
Financial Position
Decision Making
Requirement Mandatory Optional
Primary Audience External Internal
Invenstors, Regulators,
Tax Authorities, etc
Management & Decision
Makers
Regulation/Guidelines GAAP, IFRS, IAS None
Frequency Quarterly, Annual, or per
period
As needed and ongoing
External Review Auditors, Regulators None
Focus Past transaction Information to aid
decisions for the future
Scope Company Wide Narrow per segment,
product, etc (as needed)

9. Process of Management
Accounting Information Tool

10. Tools and Techniques
• Financial Statements Analysis
• Historical Cost Accounting
• Fund Flow Analysis
• Cash Flow Analysis
• Budgetary Control
• Standard Costing
• Marginal Costing
• Decision Accounting
• Revaluation Accounting
• Control Accounting
• Management Information System

11. Analysis of Financial Statements
• Means to classify and present the
financial data useful for the management.
• Financial analysis includes comparative
financial statements, ratios, fund flow
statements, trend analysis etc.

12. Historical Cost Accounting
• The price of an asset on the balance sheet
is based on its nominal or actual cost
when acquired by the company is known
as historical cost accounting.
• Actual cost is compared with standard cost
to get an idea about performance of the
concern.

13. Fund Flow Analysis
• Analyzing a movement of funds within a
company by comparing successive B/S to note
where additional funds have come from and
where they have been deployed in the business.
• To know the adequacy or inadequacy of working
capital even in advance.
• To plan the intermediate and long-term financing
of the firm, repayment of long-term debts,
expansion of the business, allocation of
resources, etc.

14. Cash Flow Analysis
• Evaluation of a company’s cash inflows
and outflows from operations, financing
activities, and investing activities.
• In the other words, this is the examination
of how the company is generating its
money, where it is coming from, and what
it means about the value of the overall
company.

15. Budgetary Control
• It is a system which uses budgets as a tool
for planning and control.
• Budgets for all departments are prepared
in advance.
• Actual performance is compared with the
predetermined targets.
• Helps to asses the performance of each
and every persons in the organization.

16. Standard Costing
• Here costs are determined in advance.
• Actual cost are recorded and compared
with the standard costs.
• Variances are analyzed and their reasons
are ascertained.
• It helps to enhance the efficiency of the
concern.

17. Marginal Costing
• Method of costing concerned with changes
in costs resulting from changes in the
volume of production.
• It is helpful for measurement of profitability
of different lines of production, different
departments and divisions of an
enterprise.

18. Decision Accounting
• Decision making is an important work of
management.
• It involves a choice from various
alternatives.
• Management Accounting calculates
financial implications of each alternative
course of action and helps management to
select best course of action.

19. Revaluation Accounting
• Also known as Replacement Accounting
“It is used to denote the methods employed
for overcoming the problems connected
with fixed asset replacement in a period of
rising prices” (Batty)

20. Control Accounting
• It is not a separate accounting system.
• It is the methods and procedures that are
implemented by a firm to help ensure the
validity and accuracy of its own financial
statements.
• In controlling accounting we can use
internal check, internal audit, statutory
audit.

21. Management Information System
• It is a computerized database of financial
information organized and programmed in
such a way that it produces regular reports
on operations for every level of
management in a company.
• Data planning is supplied to management.
• Feedbacks are received.