MANAGEMENT ACCOUNTING

Parminder Bajaj
 WHAT IS MANAGEMENT
ACCOUNTING?
 MANAGEMENT ACCOUNTING COMPRISES OF TWO WORDS
“MANAGEMENT + ACCOUNTING” i.e ACCOUNTING FOR THE USE OF
MANAGEMENT.
 A TEAM OF British industrial accountants and managers HAS
DEFINED MANAGEMENT ACCOUNTING AS “ The presentation of
accounting information in such a way as to assist management in
creation of policy and day to day operations of an undertaking.”

Parminder Bajaj
 DIFFERENCE BETWEEN FINANCIAL ACCOUNTING AND
MANAGEMENT ACCOUNTING
FINANCIAL ACCOUNTING
1. Purpose of financial
accounting is to record
various transaction and to
know financial position of the
firm.
2. Preparation of financial
accounting is compulsory
3. In financial accounting only
actual figures are recorded.
4. Financial accounting reports
are prepared for external
users.
5. Final accounts are prepared
at the end of one year.
MANAGEMENT ACCOUNTING
 Management accounting is
essential for management in
formulating policies and plan.
 Preparation of management
accounting is not compulsory
 In management accounting no
emphasis is given to actual
figures, rather it is based upon
estimated figures.
 Management accounting reports
are prepared for internal users.
 Reports are prepared at regular
intervalsParminder Bajaj
 Contd…..
Financial accounting Management accounting

6. Financial accounts are Management accounting

governed by GAAP. are not governed by any
such principals
Management accounting
7.Financial accounts are is done for management
to be published under and is not published.
companies act. Management accounting
8. Financial accounts are reports are not audited
to be audited under
co.act

Parminder Bajaj
FEATURES OF MANAGEMENT ACCOUNTING

 PROVIDING ACCOUNTING INFORMATION

 CAUSE AND EFFECT RELATIONSHIP
 USE OF SPECIAL TECHNIQUES AND CONCEPTS
 TAKING IMPORTANT DECISIONS
 ACHIEVING OF OBJECTIVES
 NO FIXED NORMS FOLLOWED
 INCREASE IN EFFICIENCY
 SUPPLIES INFORMATION AND NOT DECISION
 CONCERNED WITH FORCASTING

Parminder Bajaj
SCOPE OF MANAGEMENT
ACCOUNTING

 FINANCIALACCOUNTING
 COST ACCOUNTING
 FINANCIAL MANAGEMENT
 BUDGETING AND FORECASTING
 INVENTORY CONTROL
 REPORTING TO MANAGEMENT
 INTERPRETATION OF DATA
 TAX ACCOUNTING

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OBJECTIVES OF MANAGEMENT
ACCOUNTING
 HELPFUL IN CONTROLLING PERFORMANCE
 PLANNING AND POLICY FORMULATION
 HELPFUL IN ORGANISING
 HELPFUL IN INTERPRETING FINANCIAL
INFORMATION
 MOTIVATING EMPLOYEES
 HELPFUL IN DECISION MAKING
 REPORTING TO MANAGEMENT
 HELPFUL IN COORDINATION
 HELPFUL IN TAX ADMINISTERATION

Parminder Bajaj
FUNCTIONS OF MANAGEMENT
ACCOUNTING

 PLANNING AND FORECASTING

 MODIFICATION OF DATA
 FINANCIAL ANALYSIS AND INTERPRETATION
 FACILITATES MANAGERIAL CONTROL
 COMMUNICATION
 USE OF QUALITATIVE INFORMATION
 CO-ORDINATING
 HELPFUL IN SRATEGIC DECISIONS
 SUPPLYING INFORMATION TO VARIOUS
LEVELS OF MANAGEMENT

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TOOLS AND TECHNIQUES OF
MANAGEMENT ACCOUNTING
 Analysis of financial statement
 Historical cost accounting
 Budgetary control
 Standard costing
 Marginal costing
 Decision accounting

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IMPORTANCE OF MANAGEMENT
ACCOUNTING

 INCREASES EFFICIENCY
 PROPER PLANNING
 MEASUREMENT OF PERFORMANCE
 MAXIMISING PROFITABILITY
 IMPROVES SERVICE TO CUSTOMER
 EFFECTIVE MANAGEMENT CONTROL

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LIMITATION OF MANAGEMENT TOP
ACCOUNTING

 BASED ON ACCOUNTING INFORMATION

 LACK OF KNOWLEDGE
 INTUITIVE DECISION
 NOT AN ALTERNATIVE TO MANAGEMENT
 TOP HEAVY STRUCTURE
 EVOLUTIONARY STAGE
 PERSONAL BIAS
 PSYCOLOGICAL RESISTENCE

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