Accounting has existed for centuries and developed over time. Management accounting evolved to provide accounting information tailored to management's needs for decision making, planning, and control. It utilizes techniques like budgeting and standard costing. While valuable for management, management accounting relies on other accounting systems and human judgment, so it has limitations. Overall, it aims to improve organizational efficiency and profitability through informed managerial actions.

2. Introduction
 Accounting is as old as money
 Took centuries to developed stage
 Still it is not in a finished form
 The modern system of accounting - Double Entry
Principles - introduced by Luco Pacioli, who first published
“Principle of Double Entry System of Book-Keeping” in
1494.
 Is the process of recording business transactions with the
objective of ascertaining business results and financial
position.
 Is a discipline, which records, classifies, summarizes and
interprets financial information about the business
activities of a concern so that intelligent decisions can be
made about the business.

3. “The process of identifying, measuring and
communicating economic information to
permit the informed judgments and decision
by users of the information” -
The American Accounting Association
• Three major branches
1. Financial Accounting
2. Cost Accounting and
3. Management Accounting

4. FINANCIAL ACCOUNTING
• That branch of accounting, which deals with the
accounting process for the purpose of ascertaining the
business result (profit or loss) and financial position of
a business
• “the art of recording, classifying and summarizing in a
significant manner and in terms of money, transactions
and events, which in part, at least of financial character
and interpreting the result thereof” – AICPA
• Primarily concerned with record keeping directed
towards the preparation of income statement and
balance sheet.
• Is employed to communicate the financial information
of a business to different stakeholders of the business
or users of accounting information

5. • Major objectives:-
Ascertain (i) the business result and
(ii) the financial position
• For this purpose, it records, classifies and
summarises business transactions
• Business result is ascertained by preparing Profit
and Loss Account (Income Statement) and
• Financial position by preparing Balance Sheet at
the last day of the accounting period
• Follows several accounting principles - Generally
Accepted Accounting Principle (GAAP)
• Accounting principles can be broadly divided into
(i) Concepts and (ii) Conventions.

6. Limitations of Financial Accounting
• It is historical in nature
• Provides information about the business as a whole
• Not helpful in price fixation
• Cost control is not possible
• Evaluation of various policies and programmes is not
possible
• Deals only in monetary terms, physical quantities like units
of production, number of workers, number of working days
and other qualitative data are not considered.
• Does not help in making strategic decisions
• Accounting conventions and concepts
• Chances of manipulation
• Does not provide clear picture about the operating
efficiency

7. Cost Accounting
Developed due to limitations of financial
accounting
Deals with classifying, recording and appropriate
allocation of expenditure for the determination
of the cost of products or services.
The major objective of cost accounting is cost
ascertainment and cost control
 Through different costing and cost accounting
techniques and methods, cost accounting help to
determine the cost of products or services, cost
control and cost reduction

8. • ICMA, London defines cost accounting as “process
of accounting for cost which begins with the
recording of expenditure and ends with the
preparations of ...”
• Limitations of Cost Accounting
1. It is not an independent system of accounting
2. It is based largely on estimates and forecasts
3. Scope for subjectivity due to large number of
conventions, estimates and flexibility
4. Does not consider all items of expenditure and
income

9. Management Accounting
 Other branches of accounting provide valuable
information – but – limitations especially from the
view point of the management
 To discharge managerial functions efficiently and
effectively, management require adequate and
timely information
 Both Financial Accounting and Cost Accounting
fail to meet various information requirements of
the management
 Management Accounting - evolved to overcome
limitations of other systems of accounting to
cater to the various information requirement of
the management

10. Meaning and definition
• Composed of two words, ‘Management’ and
‘Accounting’.
• It is the study of managerial aspects of
accounting.
• A system of accounting designed to cater to the
informational requirements of management
• Deals with the presentation of accounting
information to the management to discharge its
functions.
• It is management oriented accounting

11. Some Definitions
• “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” – Anglo-American Council
on Productivity
• “is concerned with accounting information that
is useful to management” – Robert N. Anthony
• “is the adaptation and analysis of accounting
information and its diagnosis and explanation in
such a way as to assist management” – TG Rose

12. Definitions contd….
• “Is the term used to describe the accounting
methods, systems and techniques which, coupled
with special knowledge and ability, assist
management in its task of maximising profits or
minimising losses” – J Batty
• “Any form of accounting, which enables a business o
be conducted more efficiently, can be regarded as
Management Accounting” – Institute of Chartered
Accountants, England.
• “Is the accounting for effective management” – NK
Bose

13. Functions of Management Accounting
 Basic function - to assist the management in
performing its functions efficiently and effectively.
 Other functions
– Provides data to perform managerial functions
– Modifies data: data collected are modified to suit
to the various data requirements of the mgmt
– Analyses and interpretation of data
– Serves as a means of communicating
– Facilitates control
– Facilitates the use of qualitative information

14. Objectives of Management Accounting
 The primary - enable the management to maximise
profits or minimise losses
 Other objectives
– Provide data for planning and policy formulation
– Help in controlling performance
– Help in organising
– Help in interpreting, presenting and
communicating financial information
– Motivate employees
– Help in decision making
– Help in co-ordination
– Help government and tax authorities

15. Scope of Management Accounting
To cater to the diverse data requirements of management
by collecting, summarising, analysing, interpreting and
communicating data / information
To provide data to the management, it depends different
branches of accounting, subjects, tools and techniques.
Thus, it scope is very wide, and extends to
Financial Accounting
Cost Accounting
Inventory Control
Statistical Methods
Internal Reporting
Taxation
Office Services

16. Utility or Uses of Management Accounting
Provides invaluable services to the management
by providing timely adequate data
It helps to perform managerial functions
effectively
• Planning : provides adequate past and present
data as well as forecasts and estimates for
effective planning
• Controlling: Standard costing, budgetary
control, departmental operating statements etc.
greatly help to perform this function.

17. Utility or Uses of Management Accounting contd...
• Co-ordination: Perfect co-ordination among
different functional departments through
functional and departmental budgets, reports etc
• Organising: by dividing the organisation into
suitable cost, profit and responsibility centres
help in organising function of management
• Communicating: through appropriate office
services and reporting system ensure proper
timely communication within the organisation.

18. Management Accounting and Other Branches of Accounting
 Developed due to the limitations branches of accounting.
 Several similarities and dissimilarities between management
accounting and other branches of accounting.
Differences between Management Accounting and Financial
Accounting
1. Object
2. Nature
3. Deals with the business as a whole not in part
4. Compulsory
5. Only actual figures not estimates, approximation or forecasts,
NOT accurate and precise
6. Used by different stakeholders , used by management
7. Periodicity of preparation of statements and reports
8. Strictly follows the accounting principles (GAAP),
9. Publication of final accounts – compulsory
10. Auditing

19. Cost Accounting and Management Accounting
• An important tool
• Though some sort overlapping exist in certain areas of cost
accounting and management accounting, these two
systems differ in several respects
1. The object
2. Scope of management accounting is very wide and it
includes financial accounting and cost accounting, tax
planning, capital budgeting, reporting etc.
3. In costing only quantitative figures are recorded and
processed.
4. Costing follows certain principles and conventions.
5. Cost accounting is based on past and present facts and
figures,
6. Users of information

20. Need and Importance of Management Accounting
• Importance of managerial decisions and functions -
need for information
• It is a specialised branch of accounting developed to
cater to the information needs of the management.
 Benefits / advantages
1. Increases efficiency of the organisation
2. Helps in proper planning by providing required
information
3. Facilitates performance appraisal through budgetary
control system, standard costing etc
4. Helps in maximising profitability
5. Effective management and control
6. Better services to the customers at minimum costs.

21. Limitations of Management Accounting
Though helpful to management suffers from
several limitations
1. Heavily depends on defective accounting
systems and other records for data
2. Can only advise – to be decided and expected
by management. Otherwise the system is
insignificant
3. Not an alternate or substitute for management
only a tool for taking managerial decisions and
performing managerial functions

22. Limitations contd…..
4. Human judgment involved leads to chances for
personal bias and subjectivity.
5. Still in evolutionary stage -scope for further
improvement and chances for obsolescence of
various principles, tools and techniques of
management accounting, used today.
6. Installation of management accounting a costly
affair