This document provides an overview of a course on Managerial Accounting taught by Dr. Varadraj Bapat. It discusses the need to understand accounting and finance concepts for management purposes. It also summarizes the key differences between financial accounting, cost accounting, and management accounting. Finally, it provides a high-level overview of key financial statements like the balance sheet and income statement and how they are used.

1. Managerial Accounting - Dr. Varadraj Bapat
Fundamentals of
Managerial Accounting
Module 1

2. Managerial Accounting - Dr. Varadraj Bapat
Dr. Varadraj Bapat
 Chartered Accountant
 Cost Accountant
 Ph.D., IIT B, Powai, Mumbai
Contact Information:
varadraj@som.iitb.ac.in

3. Managerial Accounting - Dr. Varadraj Bapat
LEARNING OBJECTIVES
 Need to Know About Accounting
 Managerial Accounting
 Financial Statements - Balance Sheet,
Income Statement

4. Managerial Accounting - Dr. Varadraj Bapat
Need to Know About Accounting
 Need to Know About Accounting and
Finance

5. Managerial Accounting - Dr. Varadraj Bapat
“Why do I need to learn about finance …
I am very good in my
own area of specialization”
How would you react to the above
statement?

6. Managerial Accounting - Dr. Varadraj Bapat
The job content
Functional
Expertise
Management
& Finance
Expertise
As
you
mo
ve
up
..

7. Managerial Accounting - Dr. Varadraj Bapat
About Managerial Accounting
 What is Accounting?
 Financial Accounting, Cost Accounting and
Management Accounting
 Financial Accounting and Financial
Management
 Finance and complexity of organisation

8. Managerial Accounting - Dr. Varadraj Bapat
Accounting
 Language of Business
 Performance is reported and
evaluated in financial terms
 Knowledge is useful for
personal investment and tax
planning as well

9. Managerial Accounting - Dr. Varadraj Bapat
 It is not necessary to become
accountant
 But its very useful if every one
understands the accounting
and financial concepts and
terminology properly
Accounting

10. Managerial Accounting - Dr. Varadraj Bapat
Need to Learn Accounting
 It assists in management
 Will help in planning,
organisation and control of
business
 Leads to increase in efficiency of
business
 Profit maximization

11. Managerial Accounting - Dr. Varadraj Bapat
Streams of Accounting
 Financial Accounting, Cost
Accounting and Management
Accounting
 Let us understand the
similarities and difference in
these three streams of
accounting

12. Managerial Accounting - Dr. Varadraj Bapat
Financial Accounting
 Recording of Financial
Transactions
 Reporting of Financial Results
 Preparation of Financial
Statements
 Targeted to External Users

13. Managerial Accounting - Dr. Varadraj Bapat
Cost Accounting
 Recording of Costs
 Analysis of Costs
 Preparation of Cost
Statements
 Targeted to Internal Users

14. Managerial Accounting - Dr. Varadraj Bapat
Management Accounting
 Recording of Financial & other
data
 Analysis of Financial and other
information
 Preparation of Statements for
Managerial Decisions

15. Managerial Accounting - Dr. Varadraj Bapat
Management Accounting
 Targeted to Internal Users -
All levels of Management
 This is a broader concept
encompasses Financial and
Cost Accounting

16. Managerial Accounting - Dr. Varadraj Bapat
Meaning of Management
Accounting
 Any form of accounting which
enables a business to be
conducted more efficiently can
be regarded as Management
Accounting. (Institute of
Chartered Accountants of India-
ICAI)
 Management Accounting is the

17. Managerial Accounting - Dr. Varadraj Bapat
application of professional
knowledge and skill in the
preparation of accounting
information in such a way as to
assist management in the formation
of policies and in the planning and
control of operations of undertaking.
(International Capital Market
Association, London- ICMA)

18. Managerial Accounting - Dr. Varadraj Bapat
Financial Management
 Financial Accounting, Managerial
Accounting and Financial
Management: Relationship
 Financial Management deals with
raising and utilization of funds
 Raising of funds may include
Cost of Capital, Capital Structure

19. Managerial Accounting - Dr. Varadraj Bapat
Financial Management
decisions, Capital Markets, IPOs
and so on
 Financial Management deals with
raising and utilization of funds
 Utilization of funds may include
Capital Budgeting, Portfolio
Management, Working Capital
Management and so on

20. Managerial Accounting - Dr. Varadraj Bapat
Managerial V/s Financial
Accounting
Accounting System
(accumulates all
accounting data)
Managerial Accounting
Information for decision
making, and control
of an organization’s
operations.
Internal
Users
External
Users
Financial Accounting
Published financial
statements and other
financial reports.

21. Managerial Accounting - Dr. Varadraj Bapat
Complexity of Organisation
 Finance and complexity of
organisation
 As the organizations grow, they
become complex
 Ownership and Management are
separated

22. Managerial Accounting - Dr. Varadraj Bapat
Complexity of Organisation
 Ownership is widespread
 This increases the importance of
Finance function

23. Managerial Accounting - Dr. Varadraj Bapat
About this course
 Managerial Accounting Course
 The course will cover Financial
Accounting, Cost Accounting
and Management Accounting
 Financial Management is dealt
in a different course

24. Managerial Accounting - Dr. Varadraj Bapat
Financial Statements
 What are they?
 Which are important Financial
Statements?
 What purposes do they serve?

25. Managerial Accounting - Dr. Varadraj Bapat
Company or Organisation
These two are
always equal
RESOURCES
FOR
BUSINESS
PROVIDERS
OF
MONEY

26. Managerial Accounting - Dr. Varadraj Bapat
The Basic Business Model
Billing
Money
Procurement
Consumption
Delivery
Collection
The
Money
Cycle
Value
Addition
Cycle
Infrastructure
People

27. Managerial Accounting - Dr. Varadraj Bapat
To be profitable, our revenue should be more than
our cost ! This would make the organisation
stronger, healthy and long-lasting.
Infrastructure
Billing
Money
Procurement
Consumption
Delivery
Collection Costs

28. Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet Profit & Loss Account
Liabilities
Capital
Borrowings from
Banks / FIs
Current
Liabilities
Assets
Fixed Assets
Current Assets
or Working
Capital
Human Assets
Outstanding
Infrastructure
People
Procurement
& Inventory
Consumption
& WIP
Delivery &
Billing
Collection
Money
Revenue
Costs
Profit/ Loss
Balance Sheet shows the financial position of
organisation, while Profit & loss Account shows
the profitability of organisation.

29. Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet shows the
cumulative position of resources
(assets) and sources of funds
(liabilities) at the end of the year.
Profit & Loss Account shows
‘Revenue & Cost’ performance
during a quarter/ year.

30. Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet Profit & Loss Account
Liabilities
Capital
Borrowings
(eg.from Banks)
Current
Liabilities
Assets
Fixed Assets
Current Assets
or Working
Capital
Human Assets
Outstanding
Infrastructure
People
Procurement
& Inventory
Consumption
& WIP
Delivery &
Billing
Collection
Money
Revenue
Costs
Profit
Profits build up reserves & enable an
enterprise to acquire new assets without
borrowing money. Exactly the way we can
acquire assets for our use without borrowing.
Reserves

31. Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet Profit & Loss Account
Liabilities
Capital
Borrowings
(eg.from Banks)
Current
Liabilities
Assets
Fixed Assets
Current Assets
or Working
Capital
Human Assets
Outstanding
Infrastructure
People
Procurement
& Inventory
Consumption
& WIP
Delivery &
Billing
Collection
Money
Revenue
Costs
Profit
Profits build up reserves & enable an enterprise to acquire
new assets without borrowing money. Exactly the way we
can acquire assets for our use without borrowing.
Reserves

32. Managerial Accounting - Dr. Varadraj Bapat
 Balance sheet may be prepared
at any time showing the position
as on that date.
 Profit and loss account may be
prepared for any particular
period.

33. Managerial Accounting - Dr. Varadraj Bapat
Balance Sheet
 Owners Funds
 Non Current
liabilities
 Current
liabilities
 Fixed Assets
 Non Current
Investments
 Other non
current assets
 Current
Assets

34. Managerial Accounting - Dr. Varadraj Bapat
The Annual Report
Usually Contains ...
– financial statements which consist
of
• Balance sheet, Profit & Loss A/c
• Cash Flow Statements
• notes to the financial statements
• disclosure of accounting policies

35. Managerial Accounting - Dr. Varadraj Bapat
The Annual Report
Usually Contains ...
- Chairman’s Statement
- Board of Directors & Committees
- Directors Report
- Directors Responsibility Statement
- Auditors Report
- Report on Corporate Governance

36. Managerial Accounting - Dr. Varadraj Bapat
The Annual Report
Usually Contains ...
- Disclosure regarding Employee
Stock options Schemes
- List of employees receiving
remuneration exceeding Rs. 60
Lakhs
- Conservation of Energy Reports

37. Managerial Accounting - Dr. Varadraj Bapat
The Annual Report
Usually Contains ...
- Consolidated Financial Statements
- Subsidiaries Financial Statements
- Management Discussion and
Analysis
- Annual General Meeting Notice