1. MANAGEMENTACCOUNTING BY DHRUBA CHAKRABORTY MBA-HM 1ST SEM

2. INTRODUCTION TO ACCOUNTINGACCOUNTING is the art ofrecording classifying andsummarizing in a significantmanner and in terms ofmoney transactions whichare of financial characterand interpreting the resultsthere of.ACCountInG Is CAllED tHElAnGuAGE oF BusInEss tHAtserves as a means ofcommunication. 3. Accounting Information SystemProcess of gathering, organizing, andCommunicating financial information Financia l Stateme nts 4. History of accountingmanagementManagement accountingdeveloped to meetmAnAGEmEnts nEEDs Forinformation as complexityand uncertainty increasedwith geographical expansionand product diversification 5. Peter Drucker , In tHE EmErGInGtHEory oF mAnuFACturInG, mADEthe comment:tHE most ExCItInG AnD InnovAtIvE workin management today is found inaccounting theory, with new concepts,new methodology --even what might becalled new economic philosophy --rapidly taking shape. And while thereis enormous controversy over specifics,the linaments of the newmanufacturing accounting areBEComInG ClEArEr EvEry DAy. 6. MANAGEMENT ACCOUNTINGAccounting thatconcentrates on reportingto people inside the businessentity is calledmAnAGEmEnt ACCountInG .provide information toemployees, managers,owner-managerand auditors.Managementaccounting isconcerned with accountinginformation which is usefulto management. 7. REQUIREMENT OF MANAGEMENT ACCOUNTING Business owners use ManagementAccounting to track, record and reportfinancial information for managerialreview.Managementaccounting does notusually follow any national accountingstandards.Business owners can design managementaccounting systems according to theircompany, business operations ormanagement and need for businessinformation. 8. FUNCTIONS OF MANAGEMENTACCOUNTINGModification of data:-Accounting data are not suitable for managerialdecision-making and control purposes . they may be usedfor making future estimates and projections.Management accounting modifies the availableaccounting data by rearranging the same , by resortingto a process of classification and combination.Analysis and data interpretation:-Accounting data is analyzed and interpreted foreffective planning and decision making . the data ispresented in a comparative form . analytical tools (trendpercentages , raTIO ANALYSIS) ARE USED AND LIKELY TRENDSARE PROJECTED.ContD. 9. FACILITATING MANAGEMENT CONTROL:-STANDARDS OF PERFORMANCE AND MEASURE OF VARIATION ARETHE ESSENTIAL ELEMENTS OF ANY CONTROL SYSTEM.ALL THESE AREMADE POSSIBLE THROUGH STANDARD COSTING AND BUDGETORYCONTROL SYSTEMS, WHICH ARE AN INTEGRAL PART OF MANAGEMENTACCOUNTING.USE OF QUALITATIVE INFORMATION:-FINANCIAL DATA AND ITS ANALYSIS ARE NOT SUFFICIENT FORDECISION MAKING .MANAGEMENT NEED QUALITATATIVEINFORMATION WHICH MAY BE OBTAINED FROM ENGINEERINGRECORDS , CASE STUDIES ETC.SATISFYING ALL LEVEL OF MANAGEMENT:- VARIOUS LEVELS OF MANAGEMENT NEED DIFFERENT TYPESOF INFORMATION.FOR TOP MANAGEMENT need CONCISEINFORMATION , MEDIUM need TECHNICAL DATA REGULARLYAND LOWER LEVEL ARE INTERESTED IN DETAILED FIGURESRELATING TO THE PARTICULAR SPHERE OF ACTIVITY AT SHORTINTERVALS. 10. ADVANTAGES OF MANAGEMENT ACCOUNTING Reduce Expenses: Management accounting help companies lower their operational expenses. Business owners often use management accounting information to review the cost of economic resources and other business operations. This information allows owners to better understand how much money it costs to run the business. Improve Cash Flow: Budgets is a major part of management accounting. Business owners often use budgets so they have a financial road map for future business expenditures. The main purpose of budgets is to save the company money through careful analysis of necessary and unnecessary cash expenditures. 11. Business Decisions: Management accounting often improves thebusiness decision-making process. Rather thanmaking business decisions based solely onqualitative analysis, business owners ormanagers can use management accountinginformation as a decision-making tool. Managementaccounting usually provides a quantitativeanalysis for various decision opportunities.Increase Financial Returns:Business owners can also use managementACCountInG to InCrEAsE tHEIr CompAnys FInAnCIAlreturns. Management accountants can preparefinancial forecasts relating to consumer demand,potential sales or the effects of consumer pricechanges in the economic marketplace. 12. Relationship of management accountingwith cost and financial accounting FINANCIALACCOUNTINGMANAGEMENT ACCOUNTING DRAWS OUT INFORMATION FROMFINANCIAL AND COSTACCOUNTING MODIFYSAME FOR COST MANEGERIAL USE.ACCOUNTING 13. Distinctions between MANAGEMENT ACCOUNTING and FINANCIAL ACCOUNTING OBJECTIVE:MANAGEMENT ACCOUNTING IS PRIMARILY AN INTERNAL REPORTING SYSTEM AND FINANCIAL ACCOUNTING IS EXTERNAL REPORTING SYSTEM. SUBJECT MATTER:MANAGEMENT ACCOUNTING PROVIDES DETAILED ANALYTICAL DATA FOR MANAGERIAL USE. FINANCIAL ACCOUNTING DEALS WITH THE OVERALL POSITION OR PERFORMANCE OF THE BUSINESS. NATURE OF DATA USED:MANAGEMENT ACCOUNTING CONCERNED WITH THE FUTURE INFORMATION.FINANCIAL ACCOUNTING CONCERNED WITH MONETARY RECORDS OF PAST EVENTS. contd.. 14. PERIODICITY OF REPORTING:FINANCIAL STATEMENTS ARE PREPARED AT END OFACCOUNTING YEAR . GREATER EMPHASIS LAID INMANAGEMENT ACCOUNTING FOR QUICK INFORMATION ATSHORT INTERVALS.ELEMENTS OF COMPULSION:FINANCIAL ACCOUNTING HAS MORE OR LESS BECOMECOMPULUSORY OR STATUTORY FOR EVERY BUSINESS. BUTA BUSINESS IS FREE TO INSTALL OR NOT INSTALL SYSTEMOF MANAGEMENT ACCOUNTING.FLEXIBILITY:ELEMENTS OF COMPULSION SHOWS THAT MANAGEMENTACCOUNTING IS HIGHLY FLEXIBLE OR LESS RIGID INAPPROACH AS COMPARED TO FINANCIAL ACCOUNTING. 15. Distinctions between managementaccounting and cost accountingcost management accounting accounting Concerned with all such Concerned with cost matters in a wider control , costperspective which help ascertainment & tools management in policy like budgetary control, formation , improve standard costing etc. productivityprofitability. Primarily deals It consider both cost with cost data. and revenue. 16. Limitations of accountingmanagementBased on Accounting Information:Mgt Accounting is based on data of Financial and Cost Accounting.Historical data is used to make future decisions. The correctness andeffectiveness of managerial decisions will depend upon the quality ofdata on which these decisions are based. If financial data is not reliablethen Mgt Accounting will not provide correct analysis.Lack of Knowledge:The application of Mgt Accounting will be useful to person connectedwith Decision making process as they have proper understanding of MgtAccounting and related subjects such as Statistics, Economics, Principlesof Mgt, Engineering etc.Intuitive decision :In Mgt Accounting decision making based on facts and figures, there is atendency to make decisions intuitively. Mgt may avoid lengthy courses ofdeciding things and may take an easy course of arriving at decision, usingintuitive. This makes management accounting system a waste.contd. 17. Limitations of accounting managementNot an alternative to Administration:The tools and techniques of Mgt Accounting provide onlyinformation and not decision. Decisions and their implementationsare done, by Mgt. So it has supplementary service function andhas no final say in taking decisions and their implementations.Top heavy structure:Introduction of this system is costly affair and can be used by bigconcerns only. Smaller concerns cant afford to use this systembecause of heavy cost.Psychological Resistance:The Installation of Mgt Accounting involves basic changes inorganizational setup. New rule and regulations are to be framedwhich affect a number of personnel and hence there is apossibility of resistance 18. Role of managementaccounting Provide accounting information to themanagement to perform its functioneffectively. Modify available relevant information foreffective planning and decision making. Provide tools like budgetary control ,standard costing etc. which helpsmanagement. Effective coordination could be achievedthrough departmental budgets and reportscontd 19. CommunicationContd is an important role ofmanagement which involvestransmission of data, information,results etc. to both outsider andinsider . decision of top management tobe communicated to middle and lowerlevel managements and the results andrequirement should be reported to toplevel management. Results have to be reported toshareholders, creditors , investors whowIsH to know ABout CompAnys FInAnCIAlposition and progress. 20. Management Accountants RoleasInternal Consultant:- Collects Preparesand compilesstandardized information reportsInternal ConsultantInterprets andIs InvolvedAnalyzes informationIn decision making Management 21. Planning, Controlling &decision making:-Planning: Setting Control:objectives andImplementing plansoutlining how the and using feedback toobjectives will beevaluate theobtained. attainment ofobjectives . Example:-Example:- BUDGETPerformance reportwhich are accounting reportprovide feedback by comparingactual results with plansDecision making: the purposeful choicefrom among a set of alternative coursesof action designed to achieve some objective.Example:-Deciding selling price of a product 22. Standards of EthicalConduct for ManagementAccountantsCompetenceConfidentialityIntegrityObjectivity 23. Major Influences on Management AccountingAdvances in technology:E-commerce Enterprise resource planning (ERP)Business process reengineering:Just-in-time (JIT) philosophyLean manufacturingComputer-integrated manufacturingSix sigma 24. Career Opportunities in Management AccountingThe Certified Management Accountant (CMA)CMA must pass a four-part examination:1. Business Analysis2. Management accounting and reporting3. Strategic Management4. Business Applications