introduction session 1 (Managerial accounting).ppt
- 1. INTRODUCTION TO MANAGEMENT ACCOUNTING VIVEK BHATIA MFC, FCMA, CMA(AUST.), CFA(ICFAI), CFA(US), LIFA(UK), FRM –L 1
- 3. What is Management Accounting Accounting for management Accounting : measuring and reporting financial activities Management : policy-formulation and decision making The Anglo–American committee defines management accounting as the presentation of accounting information in such a way as to assist management in the creation of policy in the day-to-day operations of an undertaking”.
- 4. Operational control : Provides feedback about the efficiency and the quality of the tasks performed. Product and customer : Measures the costs of resources used to costing manufacture a product or service, and market and deliver the product to the customer. Management control : Provides information about the performance of Managers and operating units. Strategic control : Provides information about the enterprise’s financial and long run competitive performance, market conditions, customer preferences, and technological innovations. Role of Management Accounting:
- 5. Financial Accounting: Financial Accounting deals with recorded facts which are useful for planning the future course of action. The performance appraisal is based on recorded facts and figures. Cost Accounting: The systems of standard costing, marginal costing, differential costing and opportunity costing are all helpful to the management for planning various business activities. Budgeting and Forecasting: . Both budgeting and forecasting are useful for management accountant in planning various activities. Inventory Control: The control of inventory ultimately will help in controlling stocks. Management will need effective inventory control to control stocks Scope of Management Accounting
- 6. Scope of Management Accounting Management Reporting: Keeping the management informed of various activities of the concern is one of the important functions of the management accountant. Interpretation of Data: The management accountant interprets various financial statements to the management. These statements give an idea about the financial and earning position of the concern Internal Audit: To judge the performance of every department internal audit system is necessary. Internal audit helps management in fixing responsibility of different individuals. Tax Accounting: Tax planning is an important part of management accounting. Income statements are prepared and tax liabilities are calculated. The management is informed about the tax burden from Central Government, State Government and local authorities.
- 7. Difference between Financial, Cost and Management Accounting The purpose of the accounting statements The facts/matters in which emphasis is laid The preparation of the statements The nature of data required for the preparation of statements The extent of precision The extent of focus on the organization as a whole Usage of other disciplines in the preparation of statements The freedom of choice involved.
- 8. In their functioning the Management Accountants use several tools and techniques such as: i. Analysis of Financial Statements ii. Budgetary Control iii. Standard Costing iv. Marginal Costing v. Decision Accounting vi. Revaluation Accounting vii. Management Information Systems Tools and Techniques of Management Accounting:
- 9. The functions of the management accountant or controller relate to the management and control of the firm’s resources. Planning and controlling function: The management accountant establishes, coordinates and maintains an integrated plan for the control of operations. Reporting and interpreting function: Compares the actual performance with the operating plans and standards, and to report deviations if any to the owners of the business. Tax administration: To establish and administer tax policies and procedures. Preparation of reports to government agencies: To prepare the report to the government agencies as required under different laws. Functions of Management Accountant:
- 10. Functions of Management Accountant: Protect the assets of the business: Performing the function of protecting the assets of the business through internal controls, auditing and ensuring proper insurance coverage. Appraisal of external influences on the business: Make an appraisal of the influence of economic, social, and governmental influences and their effect on the business.
- 11. Limitations of Management Accounting : It is based on Accounting Information : Historical Comprehensive Knowledge required It is not an Alternative to Administration Evolutionary Process Personal Judgment Resistance