INTRODUCTION OF MANAGEMENT ACCOUNTING Submitted By:- KAMALPREET KAUR ASSISTANT PROFESSOR IN COMMERCE GCCBA—42, Chandigarh

MANAGEMENT ACCOUNTING The Institute of Cost and Works Accountants of India(ICWAI) has defined management accounting as a system of collection and presentation of relevant economic information relating to an enterprise for planning, controlling and decision making.

CHARACTERISTICS OF MANAGEMENT ACCOUNTING Useful of decision making Financial and cost accounting information Internal use Purely optional Concerned with future Flexibility in presentation of information

SCOPE OF MANAGEMENT ACCOUNTIING Financial accounting Cost accounting Budgeting and forecasting Tax planning Reporting to management Cost control procedures Statistical tools Internal control and internal audit Financial analysis and interpretation

Objectives of management accounting Planning and policy formulation Helpful in controlling performance Helpful in organizing Helpful in interpreting financial information Helpful in making decisions Reporting to management Helpful in co-ordination Helpful in tax administration

FUNCTIONS OF MANAGEMENT ACCOUNTING Planning Coordinating Controlling Communication Financial analysis and interpretation Qualitative information Tax policies Decision making

Tools & Techniques of Management Accounting  Financial Management Analysis Comparative financial statements Ratio analysis Fund flow statement Trend analysis CVP analysis Cash Flow Analysis

Tools & Techniques of Management Accounting  Budgetary Control  Standard costing  Marginal costing  Responsibility accounting  Price level accounting  Human resource accounting  Social cost benefit analysis

Importance of management accounting Increases efficiency Proper planning Measurement of performance Maximizing profitability Improve service to customers Effective management control

LIMITATIONS OF MANAGEMENT ACCOUNTING Based on historical data Lack of wide knowledge Complicated approach Costly system Developing stage Lack of objectivity

DIFFERENCE BETWEEN FINANCIAL ACCOUNTING AND MANAGEMENT ACCOUNTING

BASISFINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING External and internal users Information is for external users like investors,creditors,govt.etc. Information is mainly for internal users i.e. management. Accounting MethodBased on Double entry system Not based on Double entry system Statutory requirementsObligatory to satisfy various statutory provisions Optional Analysis of cost and profitShows profit & loss of the business as a whole. Provide information about individual products, plants etc. Past and future dataRepresents past and historical trends Future oriented may use past data for future projections Periodic and continuous reporting Financial reports are prepared every year Reports are prepared frequently

BASISFINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING Accounting StandardsFollows accounting standards Management accounting is not bound by accounting standards Types of statements prepared General purpose statements are prepared Special purpose reports are prepared Publication and auditPublished for general public and audited by chartered accountants Neither published for general public nor audited by chartered accountants Monetary and non- monetary measurements Provides information in terms of money only May apply monetary or non monetary units of measurement