Management accounting involves collecting and analyzing both financial and non-financial information to help managers plan strategies, set goals, and make decisions. It differs from financial accounting in that it is for internal use by management rather than external reporting. Some key tools of management accounting include budgeting, cost accounting, financial analysis, and decision making techniques. The information provided by management accounting aims to increase efficiency, support effective planning and control, and maximize profitability for the organization.

1. Management Accounting
Chapter I
Nature and scope

2. Accounting?

3. The present age is the age of trade business and commerce.
After Globalization, liberalization, and privatization, business is
increasing day by day and becoming complex also. An
organization cannot remember all its dealing for long.
Therefore, it becomes necessary to keep written record of all
business transactions day by day, this lead to the development of
accounting. Let us understand the meaning of basic accounting.

4. Definition of Accounting
According to Committee of Terminology of American
Institute of Certified Public Account –
“Accounting is the art of recording, classifying
summarising in a significant manner and in terms of
money, transaction, and events which are, in part at least
of a financial character and interpreting the results
thereof.”

5. Financial Accounting?

6. Financial accounting is the process of preparing
financial statements that companies’ use to show their
financial performance and position to people outside the
company, Including investors, creditors, suppliers, and
customers.

7. Cost accounting?

8. Cost accounting is the classifying, recording and appropriate allocation
of expenditure for the determination of the costs of products or services,
and for the presentation of suitably arranged data for purposes of control
and guidance of management.
It includes the ascertainment of the cost of every order, job, contract,
process, service or unit as may be appropriate. It deals with the cost of
production, selling and distribution.

9. Management Accounting?

10. Meaning of Management Accounting
Management Accounting is the presentation of accounting information
in such a way as to assist management in the creation of policy and the
day-to-day operation of an undertaking.
Thus, it relates to the use of accounting data collected with the help of
financial accounting and cost accounting for the purpose of policy
formulation, planning, control and decision-making by the management.
Management accounting links management with accounting as any
accounting information required for taking managerial decisions is the
subject matter of management accounting.

11. Definition of Management Accounting
“Management Accounting is concerned with accounting information
that is useful to management.” —R.N. Anthony
“Management Accounting is the term used to describe accounting
methods, systems and techniques which coupled with special knowledge
and ability, assists management in its task of maximising profits or
minimising losses. Management Accountancy is the blending together
into a coherent whole, financial accounting, cost accountancy and all
aspects of financial management.” —Batty

12. “Management accounting is a system of collection and presentation of
relevant economic information relating to an enterprise for planning,
controlling and decision-making.” —ICWA of India
Management Accounting is “the application of appropriate techniques
and concepts in processing historical and projected economic data of an
entity to assist management in establishing plans for reasonable
economic objectives and in the making of rational decisions with a view
towards these objectives”. —American Accounting Association

13. Example
Anderson is the CEO of a small consulting firm. He wants to hire a management
accountant and a financial accountant. He has come up with a list of job tasks and he
needs to break them up into those that should be performed by the managerial
accountant and those that should be performed by the financial accountant. Here is the
list of tasks that Anderson has come up with:
Preparing cash flow statements
Income statement reporting
Budgeting
Calculating changes in stockholder equity
Preparing taxes for the organization
Classify the managerial accountant tasks and financial accountant tasks?

14. Nature of Management Accounting
It may be regarded partly as a Science and partly as an Art.
It is the science of quantifying and summarising.
It is the art of interpreting accounting data.

15. Providing financial information
Cause and effect analysis
Technique of Selective Nature
Decision making
No fixed conventions
Achievement of objectives
Improving efficiency
Forecasting
Characteristics of Management Accounting

16. Scope of Management Accounting
Financial Accounting
Cost Accounting
Budgeting and forecasting
Inventory control
Statistical analysis
Analysis of data
Internal Audit
Tax accounting
Tax and procedures

17. Objectives and functions of Management
Accounting
Presentation of data
Aid of planning and forecasting
Help in organization
Decision making
Effective control
Communication of management
policies
Incorporation of non-financial
information
Co-ordination
Motivating employees

18. Distinction between Financial and
Management Accounting
Purpose
Nature of information used
Help in organization
Decision making
Effective control
Communication of management
policies
Incorporation of non-financial
information
Co-ordination
Motivating employees

19. Management Accounting
Purpose: It is used for internal purpose
Regulation: It is not regulated by any
law
Users: Its users are the management of
an organization
Objective: It aids in internal decision
making
Mandatory: Preparation and
presentation of financial statements
is not mandatory
Audit: It is not subject to audit
Frequency: There is no defined
frequency for preparation and
presentation of the statements
Contents: Management accounts
include both monetary and non-
monetary information
Financial Accounting
Purpose: It is used for external reporting
primarily, although the management
also reviews it
Regulation: It has to be presented as per
standards
Users: Its users are shareholders,
investors and regulators
Objective: It aids in investment decision
by outsiders and monitoring by
regulators
Mandatory: Preparation and
presentation is mandatory.
Audit: Financial statements must be
audited
Frequency: Financial statements must be
prepared for the financial year and
presented
Contents: Financial accounts include
only monetary information

20. Cost Accounting
• Meaning: The recording, classifying
and summarising of cost data of an
organization is known as cost
accounting.
Information type: Quantitative.
Objective: Ascertainment of cost of
production.
Scope: Concerned with ascertainment,
allocation, distribution and
accounting aspects of cost.
Specific Procedure: Yes
Recording: Records past and present
data
Planning: Short range planning
Interdependency: Can be installed
without management accounting.
Management Accounting
Meaning: The accounting in which the
both financial and non-financial
information are provided to managers
is known as Management Accounting.
Information type: Quantitative and
Qualitative.
Objective: Providing information to
managers to set goals and forecast
strategies.
Scope: Impart and effect aspect of costs.
Specific Procedure: No
Recording: It gives more stress on the
analysis of future projections.
Planning: Short range and long range
planning
Interdependency: Cannot be installed
without cost accounting.

21. Tools and Techniques of Management Accounting
Financial policy and Accounting
Analysis of financial statement
Historical cost accounting
Budgetary control
Standard costing
Marginal costing
Other tools
Decision accounting
Revaluation accounting
Control accounting
MIS

22. Advantages/Merits/Uses of Management Accounting
Increase in efficiency
Effective planning
Performance evaluation
Profit maximization
Reliability
Elimination of wastages
Effective communication
Employee morale
Control and co-ordination

23. Limitations of Management Accounting
Dependence of basic records
Personal bias
MGT accounting is only a tool
It provides only data
Broad based scope
Resistance to change
Costly to install

24. Installation of Management Accounting System
Organization Manual
Preparation of various forms and reports
Requisite staffing
Classification of accounts
Setting up of cost centers
Introducing techniques
Providing for usage of operations research

25. Functions of Management Accountant
Planning for control
Reporting
Evaluation
Administration of tax
Appraisal of external effects
Protection of assets

26. Duties of Management Accountant
Collection of information
Evaluation of information
Interpretation of information
Reporting of information

27. Organization of Management Accounting
Managing
Director
Production Finance
Chief Mgt
Accountant
Mgt
Controller
Budget
controller
Internal
Auditor
Credit
Controller
Marketing Personnel