The document provides an introduction to management accounting, outlining its principles, definitions, objectives, and features. It covers essential topics such as financial statements, ratio analysis, leverage analysis, and fund flow and cash flow statements, emphasizing the role of management accounting in aiding decision-making. The scope and functions of management accounting are also discussed, illustrating its importance in financial planning and control within an organization.

1. MANAGEMENTACCOUNTING
Introduction
By:
Smt.UMA MINAJIGI REUR
HEAD, DEPT. OF COMMERCE & Management
Smt. V G Degree College for Women, Kalaburagi

2. MANAGEMENT
ACCOUNTING
B.COM SIXTH SEMESTER
&
BBA FOURTH SEMESTER
6.3: PRINCIPLES OF MANAGEMENT ACCOUNTING

3. B.COM SIXTH SEMESTER
6.3: PRINCIPLES OF MANAGEMENT ACCOUNTING
Unit I: Management Accounting (08 Hours):
Definition and objectives of Management Accounting - Relationship between Cost, Financial and Managerial Accounting.
Unit II : Financial Statements (15 Hours):
Nature, uses and limitations. Analysis and interpretations – meaning, procedure, objectives, and importance. Comparative
statement, Common Size Statements and Trend Analysis - practical problems.
Unit III: Ratio Analysis (15 Hours):
Definition and meaning of Ratio Analysis, importance and limitations, Profitability Ratio – Gross profit Ratio, operating
Ratio, Overall profitability ratio – Earning per share. Turnover Ratios- Inventory Turnover Ratio, Debtors Turnover Ratio,
Debt collection period , Creditors Turnover Ratio, Debt payment period, Liquidity Ratio- current ratio, liquid ratio.
Financial positions and Leverage Ratios- Debt Equity Ratio, Proprietary Ratio - Problems thereon.
Unit IV: Analysis through Leverages (12 Hours):
Meaning- types of Leverages- operating – financial and combined leverages- problems thereon.
Unit V: Fund Flow Statement (15 Hours):
Meaning , uses and limitations – preparation of fund-flow statement. Cash Flow Statement: Meaning and preparation of
Cash flow statement- problems thereon.

5. Unit I:
Definition and
Objectives of
Management
Accounting -
Relationship between
Cost, Financial and
Managerial
Accounting.

6. Management Accounting
The term Management Accounting consists of two words: “Management” and “Accounting”.
Management is a technique of managing men. Its an art of getting things done by others.
Hence, for a successful execution of all activities, management has to to take various decisions
at every level. To take proper decisions, correct information is required. Such information is
provided by accounting.
Accounting is the process of identifying, measuring and communicating economic information
to management and outsiders. Such information’s help management to take decisions.
Management Accounting is the process of identification, measurement, accumulation, analysis,
preparation, interpretation, and communication of financial information in order to plan the
formulation of policies to plan and control the operations of the controlling of business
operations.

7. Definition:
J.S. Batty defines, “Management accounting is the term used
to describe the accounting methods, systems and techniques
which coupled with special knowledge and ability to assist
management in its task of maximising profit and minimising
losses.”
Management Accounting is a system for gathering data and
other financial information primarily for the internal needs of
management. It is designed to assist internal management in
the efficient formulation, execution and appraisal of business
plans.

8. Characteristics of Management Accounting /
Nature of Management Accounting / Features of Management Accounting
The following are the features of Management Accounting:
1. It is Advisory in nature: Management Accounting supplies information required by
management and helps them to take decisions.
2. It is directed towards future: Management Accounting helps in planning and forecasting.
The historical information is used to plan future course of action.
3. It collects and selects accounting information but does not preserve it: Management
Accountant collects only the information required by the management to take decision on
future activities.
4. It is continuous in nature: Management decisions are need based. Management accounting
collects, analyses and provides information to management.
5. No set of formats for information: Though certain tools of management accounting are the
same but their use differs from concern to concern.

9. Characteristics of Management Accounting /
Nature of Management Accounting / Features of Management Accounting
6. Management Accounting is analytical in nature: Management Accounting establishes the
relationship among the accounting information recorded in the financial accounts, analyse
them to identify the causes of rise or fall in net profit.
7. Use of special tools and techniques: The main purpose for use of special tools and
techniques to make accounting data more useful. These techniques include financial
planning, analysis of financial statements, standard costing, budgetary control, graphs,
funds flow statement, marginal costing, project appraisal etc.
8. Increase in efficiency: The Management Accounting goals are setup for each department
afterwards performance appraisal will be conducted in order to know the efficiency of the
concern.
9. Taking important decisions: Management Accounting will supply the information to the
management. This will help the management to take various important decisions.

10. Objectives/ Role/ Purpose of Management Accounting
The main objective of management accounting is to help the
management to manage the organisation efficiently.
Management Accountant is required to present the information to
the management. Such information is helpful in formulating
policies, making decisions, planning activities and controlling
business operations. Thus, management accounting helps
management to maximise profits and minimise loses.

11. A management accountant must work with competence, confidence, integrity and objectivity for
the accomplishment of the following objectives:
1. Helps in planning and formulation of future policies.
2. Helps in organising.
3. Helps in controlling performance.
4. Helps in interpreting financial information.
5. Helps in motivating employees.
6. Helps in coordination.
7. Helps in communicating upto date reporting to management.
8. Helps in tax administration.
9. Helps in decision making.
10.Establishing the inter relationship of business resources of money and man power.
11.Contribute to alternative or subsidiary goal.

13. Scope of Management Accounting
The scope of Management Accounting is wide. All the functions related to finance are included in management accounting.
It covers not only the use of financial data and a part of costing theory but may be extended beyond the boundaries of
accounting and costing. It requires the aid of other disciplines such as economics, mathematics, statistics and operation
research. Some of the important items are:
1. Financial Accounting
2. Cost accounting
3. Budgeting
4. Forecasting
5. Tax Accounting
6. Interpretation and analysis of financial statements
7. Cost control procedure
8. Reporting
9. Internal Audit
10. Inflation Auditing
11. Operational Research
12. Statistical Techniques
13. Management Information System
14. Internal Control System
15. Office Services

14. Scope of
Management
Accounting

15. Functions of Management Accounting
The primary objective of a management accounting system is to provide information to the management. To
achieve this goal, it has to carry out many activities which are called functions of management accounting.
The following are the functions of management accounting:
1. Planning and forecasting
2. Modification of data
3. Analysis and interpretation
4. Co-ordination
5. Controlling
6. Communication
7. Use of qualitative information
8. Helpful in taking strategic decisions
9. Supplying information of various levels of management
10.Special studies
11.Tax Administration
12.Select the sources of finance
13.Fix the target for future
14.Helps in ascertaining the latest financial position of accounts.

16. Functions of
Management
Accounting

17. Financial accounting is a specific branch of accounting involving a process of
recording, summarizing, and reporting the myriad of transactions resulting from
business operations over a period of time.

18. Cost accounting is a process of recording, analyzing and reporting all of a
company's costs (both variable and fixed) related to the production of a product.
This is so that a company's management can make better financial decisions,
introduce efficiencies and budget accurately.

23. ThankYou