basic knowledge about mgmt. accounting

1. Submitted to: Dr. Sunil Verma
Professor of Management
Accounting
SGT UNIVERSITY,GURUGRAM
Submitted by :Nikita Yadav
Sec:B BBA(Gen)
Roll No. 150602064

2. Acc. to the Institute of mgmt.
accountants(IMA) Management
Accounting is a profession that involves
partnering in mgmt decision making
,devising planning and performance
mgmt. systems.
It gives information to managers within
organisation to provide them with the
basis to make informed business decision
that will allow them to be better equiped
in their management and control
functions.

3. Financial Accounting
Mgmt Accounting is mainly concerned with
the rearrangement of the information provide
by financial accounting. Hence, mgmt. cannot
obtain full control of operations without a
properly designed financial accounting
system.
Cost Accounting
Standard costing, marginal costing , opportunity
cost analysis , differential costing and other cost
techniques play a useful role in control and
operation of the business undertaking.

4.  Revaluation accounting
This is concerned with ensuring that capital is
maintained intact in real times and profit is
calculated with this fact in mind.
 Inventory control
It includes control over inventory from the time
it is acquired till its final disposal.
 Internal audit
Development of a suitable internl audit system
for internal control.

5. Assistance in planning and formulation of future
policies
It assists mgmt. in planning the activities of the
business .Planning is deciding in advance what is to be
done , when it is to be done, how it is to be done and
by whom it is to be done. It involues forecasting on the
basis of available information, setting goals , framing
policies determining the alternative courses of actions
and deciding on the programme of activities to be
undertaken. Thus, planning is making intelligent
forecasting. This forecasting is based on facts.Facts are
provided by past accounts on which forecast of future
transactions is made.

6. Measuring Performance
Management accounting is concerned with measuring
performance in businesses. There are two types of
performance that are typically measured. The first is
employee performance. This can mean assessing
whether an employee has been an efficient producer
or it can mean using accounting methods to
determine if a manager has attained certain goals in
order to receive a bonus. The second performance
measurement is the measurement of efficiency. This is
concerned with how efficiently resources, such as
capital, worker hours or materials, have been used.

7. Assessing Risks
Risks are an integral part of business. Taking risks can result
in major losses, but being constantly risk-averse can result in
missed opportunities. An objective of management
accounting is to assess risks in order to maximize profits.
 Allocating Resources
Resource allocation is important to any organization.
Decisions need to be made about which projects to pursue,
which products should be produced and how portfolios
should be designed.

8. Providing Accounting Information: Management according is based
on accounting information. The collection and classification of data
is the primary function of accounting department. The information
so collected is used by the management for taking policy decisions.
Cause and effect analysis: Management accounting is limited to the
preparation of profit and loss account and finding out the ultimate
result, i.e., profit or loss management accounting goes a step further.
The ‘cause and effect’ relationship is discussed in management
accounting. If there is a loss, the reasons for the loss are probed. If
there is a profit, the factors different expenditures, current assets,
interest payables, share capital, etc. So the study of cause and effect
relationship is possible in management accounting.
Taking Important Decisions: Management accounting helps in
taking various important decisions. It supplies necessary
information to the management which may base its decisions on it.

9. Increase in Efficiency: The purpose of using accounting
information is to increase efficiency of the concern. The
efficiency can be achieved by setting up goals for each
department.
Concerned with forecasting: The management
accounting is concerned with the future. It helps the
management in planning and forecasting. The historical
information is used to plan future course of action.
 Supplies Information and not decision: The
management accountant supplies information to the
management. The decisions are to be taken by the top
management. The information is classified in the manner
in which it is required by the management action.

10. Points of
Difference
Financial Accounting Management Accounting
Aim
The main aim is to provide
information to outside parties.
Outside parties include creditors,
investors, customers etc. It is mainly
aimed at assisting investors in
taking informed decisions.
Here, the aim is different than
financial accounting. Management
accounting information is meant for
management to take informed
business decisions
Regulatory
Requireme
nts
It is a mandatory requirement for
every public organization by the
government. They are governed by
Accounting Standard Boards,
companies’ law and government.
It is at the discretion of management.
There is no mandatory requirement
but still some framework and
formats are provided by institute like
CIMA, ICWAI etc.
Governing
principles
Financial accounting statements are
prepared on the basis of ‘Generally
Accepted Accounting Principles
(GAAP)’. These GAAP are different
for different countries with more or
less same features.
There is no standard basis of
preparing management accounting
statements. They are prepared based
on the requirement of the
management team.

11. Points of Difference Financial Accounting Management Accounting
Time Horizon
Time horizon for financial
accounting is past. Generally,
it is one accounting year.
It has no specific time horizon
but the main focus is on
future.
Outputs
Financial accounting reports
consist of profit and loss
statements, balance sheet and
cash flow statement.
Management accounting
reports are the monthly,
weekly or yearly analysis of
products, geographies,
functions etc.
Nature of Information Input
Information required for
financial accounting
statements is financial in
nature.
Both financial as well as non-
financial information are
utilized in the preparation of
management accounting
reports.
Perspective It has historic perspective. It has futuristic perspective