INTRODUCTION TO MANAGEMENT ACCOUNTING.pdf

Study about the introduction to managenment accounting

1. INTRODUCTION TO
MANAGEMENT
ACCOUNTING

2. TOPICS TO BE DISCUSSED
►Introduction and Definition of Management Accounting
►Relation of Management Accounting, Cost Accounting and Financial
Accounting
►Management Roles Integrated in Management Accounting
►Attributes of Management Accounting
►Scope of Management Accounting
►Management Accounting Tools and Techniques
►Difference between Management Accounting and Cost Accounting
►Difference between Management Accounting and Financial
Accounting
►Basic Functions of Management Accounting
►Concepts of Management Accounting
►Limitations of Management Accounting
►Code of Conducts

3. INTRODUCTION AND DEFINITION OF
MANAGEMENT ACCOUNTING
►Management Accounting is an accounting function for managers
with which managers get necessary financial and non-financial
information to get better idea about the business operation.
►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”.

4. INTRODUCTION AND DEFINITION OF
MANAGEMENT ACCOUNTING
CIMA Definition of Management Accounting:
►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.
►Management Accounting is accounting for effective management. -
Bose
►They are techniques and procedures by which accounting mainly seeks
to aid the management collectively.

5. Relation of Management Accounting with
Cost Accounting and Financial Accounting:
MANAGEMENT ACCOUNTING
Help Management for Planning, Control and Decision-making
FINANCIAL ACCOUNTING
Preparing Financial Statements for Reporting
COST ACCOUNTING
Evaluating Costs for Control and Optimal amount

6. Management ROLES Integrated in
Management Accounting
►Planning – setting up of objectives
►Organizing – identifying needs for the plan
►Coordinating – alignment of plans across units and
levels of the organization
►Controlling – monitoring performance according
to plan
►Motivating – incentivizes good performance
►Communicating – reporting results or
performance and provides insights

7. Attributes of Management Accounting

No Fixed Model There is no uniformity for data analyses from
organization to organization
Usage of techniques and
concepts
Management accounting through various
techniques and concepts makes data more useful
Increase operational
efficiency
It helps the management to make effective
decision and increase efficiency
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 objectivesManagement accounting directly or indirectly
helps in achieving objectives
Disseminate information It only supplies information to the necessary
department for decision
Forecasting Managers takes decisions for the future course of
action and not for the past

8. SCOPE OF MANAGEMENT
Management
Accounting
Financial
Accounting
Cost Accounting
Budgeting and
Forecasting
Statistics
Inventory
Control
Data Analysis &
Interpretation
Reporting
Methods &
Procedures
Human
Resource
Management

9. MANAGEMENT ACCOUNTING TOOLS
AND TECHNIQUES
►Financial planning / Budgeting
►Budgetary Controls
►Standard costing / Variance Analysis
►Financial Statements Analysis / Ratio Analysis
►Short-term Decision accounting
►Relevant Cost Accounting / Marginal Costing
►Management information system
►Statistical techniques
►Balance Scorecard

10. Differences between Management Accounting
and Financial Accounting: Key Differences

11. Differences between Management Accounting
and Cost Accounting: Key Differences

12. Basic Functions of Management
Accounting
COLLECTS AND PROVIDES RELEVANT DATA
ANALYZES AND INTERPRETS DATA
IDENTIFIES AND QUANTIFIES COURSES OF ACTIONS
PROVIDES RECOMMENDATIONS
EMPLOYS QUALITATIVE INFORMATION
FACILITATES CONTROL
MEASURES PERFORMANCE
COMMUNICATES PERFORMANCE

13. LIMITATIONS OF MANAGEMENT
ACCOUNTING
DISCRETIONARY
IN NATURE
SUBJECTIVITY OF
SOME DATA USED
DEPENDS ON
ACCURACY OF
FINANCIAL
STATEMENTS
IT IS ONLY A
MANAGEMENT
TOOL
UNQUANTIFIABLE
VARIABLES AND
ASSUMPTIONS
INTUITIVE /
UNCERTAIN
RESULTS

14. CODE OF ETHICAL
STANDARDS OF
MANAGEMENT
ACCOUNTANT

15. WHY IS ETHICAL
STANDARDS
IMPORTANT?

16. Code of Conduct for Management
Accountants
The Institute of Management Accountant’s (IMA)
Statement of Ethical Professional Practice
consists of two parts that offer guidelines for:
❶ Ethical behavior.
❷ Resolution for an ethical conflict.

17. Compete
nce
Follow applicable
laws, regulations,
and standards.
Maintain
professional
competence.
Provide accurate, clear,
concise, and timely
decision-support information.
IMA Guidelines for Ethical Behavior
Recognize and communicate
professional limitations that
preclude responsible
judgment.

18. Confidenti
ality
Do not disclose confidential
information unless legally
obligated to do so.
Ensure that subordinates do
not disclose confidential
information.
Do not use
confidential
information for
unethical or illegal
advantage.
IMA Guidelines for Ethical Behavior

19. Mitigate conflicts of
interest and advise others
of potential conflicts.
Abstain from activities that
might discredit the
profession.
Refrain from
conduct that
would prejudice
carrying out
duties ethically.
Integrity
IMA Guidelines for Ethical Behavior

20. Communicate information
fairly and objectively.
Disclose all relevant
information that could
influence a user’s
understanding of reports
and recommendations.
Credibility
IMA Guidelines for Ethical Behavior
Disclose delays or
deficiencies in information
timeliness, processing, or
internal controls.

21. IMA Guidelines for Resolution of an
Ethical Conflict
►Follow employer’s established policies.
►For an unresolved ethical conflict:
►Discuss the conflict with immediate supervisor or
next highest uninvolved managerial level.
►If immediate supervisor is the CEO, consider the
board of directors or the audit committee.
►Contact with levels above the immediate supervisor
should only be initiated with the supervisor’s
knowledge, assuming the supervisor is not involved.

22. IMA Guidelines for Resolution of an
Ethical Conflict
►For an unresolved ethical conflict (continued):
►Except where legally prescribed, maintain
confidentiality.
►Clarify issues in a confidential discussion with an
objective advisor.
►Consult an attorney as to legal obligations.

23. Abandoning ethical standards in business would
lead to a lower quality of life with less
desirable goods and services at higher prices.
Why Have Ethical Standards?
Without ethical standards in business, the
economy, and all of us who depend on it for
jobs, goods, and services, would suffer.
Ethical standards in business are essential for a
smooth functioning economy.