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Management Accounting

Management Accounting. The Functions of Management. Controlling. Planning. Acting. Feedback. Management Accounting. A process of: Identification Measurement Accumulation Analysis Preparation and Interpretation Communication . Nature . Various system of M anagement Accounting

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Management Accounting

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  1. Management Accounting

  2. The Functions of Management Controlling Planning Acting Feedback

  3. Management Accounting A process of: • Identification • Measurement • Accumulation • Analysis • Preparation and Interpretation • Communication

  4. Nature • Various system of Management Accounting • Concerned with collection, analysis and communication of accounting information • A science – objectification & quantification • An art – involves subjective judgment

  5. Nature (contd.) • Futuristic • Concerned with the problem of choice • Recognition of the nature of the various elements of costs • Causative relationship of various variables

  6. Scope • Financial Accounting • Cost Accounting • Revaluation Accounting • Budgetary Control • Inventory Control • Statistical Methods • Interim Reporting • Taxation • Office services • Internal Audit

  7. Phases of decision making Ph 2. Searching for alternatives Ph 1. Recognizing and defining problem Ph 3. Evaluating alternatives Ph 4. Selecting the best alternative Ph 5. Reporting

  8. Functions of Management Accounting Two types: 1. Operating functions 2. Theoretical functions

  9. Operating functions • Recording of data • Validating the data • Interpretation of data • Communicating the data

  10. Theoretical functions • Helps in planning • Helps in organizing • Helps in controlling • Helps in coordinating • Helps in decision making

  11. Advantages • Systematic regularity • Maximum return • Better and improved services • Better industrial relations • Control wastages • Economic advantages

  12. Limitations • Dependency on accuracy of records • Need for continuous coordinated efforts • Mere tool of management • Subjective judgement involved • Installation a costly affair

  13. Distinction between Financial Accounting and Management Accounting

  14. Primary Users Financial Investors Creditors Government authorities Management Internal managers of the business

  15. Purpose of Information Financial • Help investors, creditors, and others make investment, credit, and other decisions Management • Help managers plan and control business operations

  16. Focus and Time Dimension Financial • Reliability, objectivity, and focus on the past Management • Relevance • Futuristic

  17. Type of Report Financial • Financial statements restricted by GAAP, Accounting Standards Management • Internal reports not restricted by GAAP; determined by cost-benefit analysis

  18. Verification Financial • Annual independent audit by CAs Management • No independent audit

  19. Scope of Information Financial • Summary reports primarily on the company as a whole Management • Detailed reports on parts of the company

  20. Behavioral Implications Financial • Concern about adequacy of disclosure Management • Concern about how reports will affect employees behavior

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