Management Accounting Unit 1

1. Management Accounting – Unit I
Karthikeyan R
Assistant Professor
Department of Commerce with Computer Applications
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with A++ Grade (3nd Cycle – 3.64 CGPA)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100

2. Management Accounting
Management Accounting is comprised of two words
‘Management’ and ‘Accounting’. It is the study of managerial
aspect of accounting. It is that system of accounting which helps
management in carrying out its functions more efficiently.
Management accounting provides all possible information
required for managerial purposes.
Management accounting also is recognized as managerial
accounting and can be defined as a process of providing financial
information and resources to the managers in decision making.
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COIMBATORE | INDIA

3. Definition
Management Accounting is concerned with accounting
information that is useful to management.
Robert N Anthony
The Financial information should be collected, complied and presented to
management in such a way that it is helpful in solving various problems.
The essential aim of Management Accounting should be assist
management in decision making and control.
Brown and Howard
Management Accounting is a tool which helps the management in planning
and controlling various business activities.
Dr. NGPASC
COIMBATORE | INDIA

4. Definition
Management Accounting is a system of collection and
presentation of relevant economic information relating to an
enterprise for planning, controlling and decision making.
The Institute of Cost & Management Accountants
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COIMBATORE | INDIA

5. Characteristics
Providing Accounting Information
It involves the presentation of information in a way it suits managerial needs. Data is
used for reviewing various policy decisions.
Cause and Effect Analysis
The cause and effect relationship is discussed in management accounting. If there is loss, the
reasons for the loss are probed. If there is profit, the factors directly influencing the
profitability are also studied.
Use of Special Techniques and Concepts
The techniques usually used include financial planning and analysis, standard costing,
budgetary control, managerial costing, project appraisal, control accounting, etc. the type
of technique to be used will be determined according to the situation and necessity.
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COIMBATORE | INDIA

6. Characteristics
Taking Important Decisions
It supplies necessary information to the management which may base its decisions on it .
Achieving of Objectives
Historical data is used for formulations and setting up of objectives.
No fixed norms followed
The presentation of figures will be in the way which suits the concern most. So every concern
has its own way its own rules and by rules for analyzing the data.
Increase in Efficiency
The purpose of using accounting information is to increase efficiency of the concern. It can be
achieved by setting up of goals for each department or section
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COIMBATORE | INDIA

7. Characteristics
Supplies Information and Not Decision
The management accountant supplies information to the management then the decisions
taken by the top management.
Concerned with Forecasting
The management accounting concerned with the future it helps the management in planning
and forecasting.
Dr. NGPASC
COIMBATORE | INDIA

8. Objectives
Planning and Policy Formulation
The object of management accounting is to supply necessary data to the management for
formulating plans. Planning is essentially related to taking decisions for future.
Helpful in Controlling Performance
The management accountant acts as a coordinating link between different departments and
also monitors their performance to the top management. .
Helpful in Organizing
Organization is related to the establishment of relationship among different individuals in the
concern. It also includes the delegation of authority and fixing of responsibility. It is
connected with the establishment of cost centers, preparation of budgets.
Helpful in Interpreting Financial Information
The main object of management accounting is to present financial information to the
management in such a way that it is easily understood.
Dr. NGPASC
COIMBATORE | INDIA

9. Objectives
Motivating Employees
It helps the management in selecting best alternatives of doing the things.
Targets are laid down for the employees. They feel motivated in achieving their targets
and further incentives for giving their performance.
Helpful in Making Decisions
The management has to take certain important decisions. A decision may have to be taken
about expansion or diversification of production.
Reporting to Management
One of the primary objective of management accounting is to keep the management fully
informed about the latest position of the concern it helps the management in taking
decisions properly.
Helpful in Co -Ordination
It provides tools which are helpful in coordinating the activities of different sections or
departments. Co ordinating done through functional budgeting.
Dr. NGPASC
COIMBATORE | INDIA

10. Functions
Planning and Forecasting
Modification of Data
Financial Analysis and Interpretation
Facilitates Managerial Controls
Communication
Use of Qualitative Information
Co Ordinating
Helpful in taking strategic decisions
Supplying information to various levels of Management
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COIMBATORE | INDIA

11. Differences
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COIMBATORE | INDIA