Management accounting notes
UNIT-1
i) Meaning of management accounting Accounting for Management, Accounting for Business
Management/ Resource Management, Accounting for Managerial Decision making. It refers to
the use of Accounting Information by the management internally to perform various managerial
functions like policy making, decision making, planning/Budgeting, controlling etc.
ii) nature of management accounting
a) technique of selective nature
Only takes into consideration the information which is relevant and useful and is communicated
with the management which is helpful for taking decisions on various aspects of the business.
b) provides data and not the decisions
c) concerned with future
Helps in planning for the future and for the future course of action
d) analysis of different variables Management accounting helps in analysing the reasons as to
why the profit or loss is more or less as compared to the past period.
e) No Set Formats for Information
It provides the information to the management in the form which may be more useful to the
management in taking various decisions.
iii) objectives and functions
● Presentation of Data: Management accounting modifies and rearranges data as per the
requirements for decision making through various techniques.
● Aid of planning and forecasting: Management accounting is helpful to the management in the
process of planning through the techniques of budgetary control and standard costing.
● Help in organizing: Management accounting aims at aiding the management in organizing
through establishment of cost centers, profit centers responsibility centres,budget preparation
etc.
● Decision making: Management accounting provides comparative data for analysis and
interpretation for effective decision making and policy formulation.
● Communication of management policies: Management accounting conveys the policies of the
management downward to the personal effective for proper implementation.
● Effective control: Standard costing and budgetary control are integral part of management
accounting
● Incorporation of non-financial information: Management accountings consider both financial
and non-financial information for developing alternative courses of action.
● Motivating employees: A major objectives of management accounting is to determine the
targets in the form of budgets, standards and programmer in such a way that the employees
feel motivated to achieve them.
● Planning for control: Management accountant establishes, coordinates and maintains an
integrated plan for control of operations.
,● Reporting: Management accountant measures performance against given plans and
standards.
● Administration of tax: Management accountant is expected to report to government agencies
as required under different laws and to supervise all matters relating to taxes.
iv) advantages of management accounting
1. It helps to increase the efficiency of all functions of management
2. It helps in target-fixing, decision-making, price-fixing, selection of product-mix and so on
3. Forecasting and Budgeting help the concern to plan the future and financial activities
4. Various tools and techniques provide reliability and authenticity to carry out the business
functions
5. It is useful in controlling wastage and defects
v) limitations of management accounting
1. It is concerned with financial and cost accounting. If these records are not reliable, it will affect
the effectiveness of management accounting.
2. Decisions taken by the management accountant may or may not be executed by the
management.
3. It is very expensive. Only big concerns can adopt this method of accounting.
4. It provides only data and not decisions.
5. It is a tool to the management and not an alternative of management.
vi) cost accounting vs management accounting
,vii) financial accounting vs management accounting
Unit-2
i) financial statement
A financial statement is the output of the accounting, prepared at the end of the year, it is also
called as final accounting, and it consists of
1. Trading and Profit & loss a/c or income statement
2. Profit & loss appropriation account or retained earnings statement or surplus statement
3. Balance sheet or position statement
ii) tools of financial statement analysis
1. Funds flow analysis
2. Cash flow analysis
3. Ratio analysis
4. Break-even analysis
iii) trend analysis
, Trend analysis evaluates an organisation’s financial information over a period of time. Periods
may be measured in months, quarters, or years, depending on the circumstances. The goal is to
calculate and analyze the amount of change and percent change from one period to the next.
iv) Comparative Income statement format
UNIT-1
i) Meaning of management accounting Accounting for Management, Accounting for Business
Management/ Resource Management, Accounting for Managerial Decision making. It refers to
the use of Accounting Information by the management internally to perform various managerial
functions like policy making, decision making, planning/Budgeting, controlling etc.
ii) nature of management accounting
a) technique of selective nature
Only takes into consideration the information which is relevant and useful and is communicated
with the management which is helpful for taking decisions on various aspects of the business.
b) provides data and not the decisions
c) concerned with future
Helps in planning for the future and for the future course of action
d) analysis of different variables Management accounting helps in analysing the reasons as to
why the profit or loss is more or less as compared to the past period.
e) No Set Formats for Information
It provides the information to the management in the form which may be more useful to the
management in taking various decisions.
iii) objectives and functions
● Presentation of Data: Management accounting modifies and rearranges data as per the
requirements for decision making through various techniques.
● Aid of planning and forecasting: Management accounting is helpful to the management in the
process of planning through the techniques of budgetary control and standard costing.
● Help in organizing: Management accounting aims at aiding the management in organizing
through establishment of cost centers, profit centers responsibility centres,budget preparation
etc.
● Decision making: Management accounting provides comparative data for analysis and
interpretation for effective decision making and policy formulation.
● Communication of management policies: Management accounting conveys the policies of the
management downward to the personal effective for proper implementation.
● Effective control: Standard costing and budgetary control are integral part of management
accounting
● Incorporation of non-financial information: Management accountings consider both financial
and non-financial information for developing alternative courses of action.
● Motivating employees: A major objectives of management accounting is to determine the
targets in the form of budgets, standards and programmer in such a way that the employees
feel motivated to achieve them.
● Planning for control: Management accountant establishes, coordinates and maintains an
integrated plan for control of operations.
,● Reporting: Management accountant measures performance against given plans and
standards.
● Administration of tax: Management accountant is expected to report to government agencies
as required under different laws and to supervise all matters relating to taxes.
iv) advantages of management accounting
1. It helps to increase the efficiency of all functions of management
2. It helps in target-fixing, decision-making, price-fixing, selection of product-mix and so on
3. Forecasting and Budgeting help the concern to plan the future and financial activities
4. Various tools and techniques provide reliability and authenticity to carry out the business
functions
5. It is useful in controlling wastage and defects
v) limitations of management accounting
1. It is concerned with financial and cost accounting. If these records are not reliable, it will affect
the effectiveness of management accounting.
2. Decisions taken by the management accountant may or may not be executed by the
management.
3. It is very expensive. Only big concerns can adopt this method of accounting.
4. It provides only data and not decisions.
5. It is a tool to the management and not an alternative of management.
vi) cost accounting vs management accounting
,vii) financial accounting vs management accounting
Unit-2
i) financial statement
A financial statement is the output of the accounting, prepared at the end of the year, it is also
called as final accounting, and it consists of
1. Trading and Profit & loss a/c or income statement
2. Profit & loss appropriation account or retained earnings statement or surplus statement
3. Balance sheet or position statement
ii) tools of financial statement analysis
1. Funds flow analysis
2. Cash flow analysis
3. Ratio analysis
4. Break-even analysis
iii) trend analysis
, Trend analysis evaluates an organisation’s financial information over a period of time. Periods
may be measured in months, quarters, or years, depending on the circumstances. The goal is to
calculate and analyze the amount of change and percent change from one period to the next.
iv) Comparative Income statement format
