1. Introduction to Management Accounting
MODULE - 1   Chapter – I
Introduction to Management Accounting
Dr. Manoj Shah, Principal Investigator, NMEICT

2. Topics to be enlightened…
Introduction and Meaning of Management Accounting
Definition
Relation of Management Accounting with Cost Accounting and Financial Accounting
Role of Management Accounting
Nature of Management Accounting
Scope of Management Accounting
Tools and Techniques
Difference between Management Accounting and Cost Accounting
Difference between Management Accounting and Financial Accounting
Functions of Management Accounting
Concepts of Management Accounting
Limitations of Management Accounting
Dr. Manoj Shah, Principal Investigator, NMEICT

3. Introduction & Meaning
Management Accounting is the base in accounting for managers with which managers get necessary information on executing their functions.
Decision making in any business enterprise is a primary function of the management.
Financial Accounting leads to the formation of the Management Accounting in that it provides various sets of accounts and statements which, though not enough for decision making, provide raw data to the managers for Management Accounting.
Management Accounting is an accounting system designed to provide adequate and appropriate information to the management in order to carry out its functions.
It is also known as “Management Oriented Accounting” or “Accounting for Management”.
Dr. Manoj Shah, Principal Investigator, NMEICT

4. Dr. Manoj Shah, Principal Investigator, NMEICT
Definitions
Management Accounting is accounting for effective management.
—Bose
Such of its techniques and procedures by which accounting mainly seeks to aid the management collectively have come to be known as management accounting.
—The Institute of Chartered Accountants of India
Management Accounting is an integral part of management concerned with identifying, presenting and interpreting information used for formulating strategy, planning and controlling activities, decision making, optimizing the use of resources, disclosure to shareholders and other external to the entity, disclosure to employees, safeguarding assets.
—The CIMA
Dr. Manoj Shah, Principal Investigator, NMEICT

5. Dr. Manoj Shah, Principal Investigator, NMEICT
Relation of Management Accounting with Cost Accounting and Financial Accounting:
Preparing Revenue statement and Position Statement
FINANCIAL ACCOUNTING
Evaluating Cost for Control and optimum competence
COST ACCOUNTING
Help Management for Planning, Control and Decision Making
MANAGEMENT ACCOUNTING
Dr. Manoj Shah, Principal Investigator, NMEICT

6. Role of Management Accounting
Planning
Organizing
Coordinating
Controlling
Motivating
Communicating
Dr. Manoj Shah, Principal Investigator, NMEICT

7. Dr. Manoj Shah, Principal Investigator, NMEICT
Tools & Techniques
Financial planning
Analysis of financial statements
Historical cost accounting
Standard costing
Budgetary control
Marginal costing
Decision accounting
Revaluation accounting
Ratio accounting
Internal auditing
Management information system
Statistical techniques
Dr. Manoj Shah, Principal Investigator, NMEICT

8. Nature of Management Accounting
Forecasting
Mangers takes decisions for the future course of action and not for the past
Disseminate information
It only supplies information to the necessary department for decision
Increase in efficiency
It helps the management to make effective decision and increase efficiency
Usage of techniques and concepts
Management accounting through various techniques and concepts makes data more useful
No fixed model
There is no uniformity for data analyses from organisation to organisation
Aids management
It provides accurate information to make right decision
Cause and effect analysis
It portrays the relation of cause and effect between the variables
Helps in achieving objectives
Management accounting directly or indirectly helps in achieving objectives
Dr. Manoj Shah, Principal Investigator, NMEICT

9. Scope of Management Accounting
Financial Accounting
Cost Accounting
Budgeting and forecasting
Statistics
Inventory control
Analysis and interpretation of data
Reporting
Methods and procedures
Dr. Manoj Shah, Principal Investigator, NMEICT

10. Dr. Manoj Shah, Principal Investigator, NMEICT
Difference
Basis
Management Accounting
Financial Accounting
Objective
Provide information to management
Main aim is to supply data or information
Performance
It provides the data of all departments and their function performed
It measures an overall performance of the business
Data usage
Quantitative and qualitative information used
It uses historical in nature uses past data
Monetary management
In this case even non-monetary events also enter into the books
Only monetary transactions are taken into consideration
Reporting
it needs continuous availability of the data and report
It is longer than management accounting
Nature
This is subjective in nature and highly based on judgement
It has been more objective than management accounting
Legality
It is voluntary practice as per organizations requirement
It is more or less a mandatory practice for every business
Coverage
It is limited in this case focusing on the needs of the management
It covers all the aspects of the concern nature
Publication and audit
In case of management accounting no such provisions are made
It is published and audited for the use of general public and stakeholders
Methodology
It ‘s revealed in various statements and reported to different centres
It is prepared in various prescribed formats
Dr. Manoj Shah, Principal Investigator, NMEICT

11. Management Accounting Dr. Manoj Shah, Principal Investigator, NMEICT
Difference
Basis
Management Accounting
Cost Accounting
Objective
Provide information to management
To record the cost of producing a product or service
Scope
It is very wide
It deals with cost ascertainment
Nature
it’s main concerned is projection of figures for future
Its uses both past and present figures
Data used
Quantitative and qualitative information used
Quantitative aspects are used
Development
This has been developed in last 3 decades
It has developed during industrial revolution
Principle followed
No specific rules and procedures are followed
Certain principles and procedures are followed for recording costs
Dr. Manoj Shah, Principal Investigator, NMEICT

12. Functions of Management Accounting
Provides data
Modifies data
Analyses and interprets data
Serves as a means for communicating
Facilitates control
Use of qualitative information
Dr. Manoj Shah, Principal Investigator, NMEICT

13. Limitations of Management Accounting
Based Solely on Accounting Records
Constant Efforts Required
Widespread Knowledge
Expensive System
Resistance to Systemic Changes
Incommensurability between Progressive Phase and Static Techniques
Dr. Manoj Shah, Principal Investigator, NMEICT