Management accounting introduction

INTRO, DEFINITION , NATURE , OBJECTIVES, SCOPE, FUNCTION

1. MANAGEMENT ACCOUNTING INTRODUCTION The origin of management accounting can be traced to overcome the limitations of financial accounting and cost accounting . Management accounting is the bridge which joins the two shores, first is accounting and second is management regarding the functions of business. Management accounting may be defined as tools and techniques that provides accounting information to carry out business.

2. Definition According to RN Anthony , Management accounting is concerned with accounting information that is used to management. In other words, management accounting is the presentation of accounting information in such a way as to assist the management in creation of policy and the day to day operation of an undertaking.

3. nature As accounting assistance in connection with management functions As managerial analysis As managerial decision making As accounting evaluation As art , Science and Profession

4. Objectives To collect , arrange and present accounting information To analyse and interprete accounting information To present and report To assist in planning To help in controlling function To provide related information for budgeting To evaluate and to help in selecting capital investment proposals To support in decision making process and policy formulation To guide for various problems of business.

5. DIFFERENCE BETWEEN FINANCIAL AND MANAGEMENT ACCOUNTING

6. Financial accounting Management accounting Provide information regarding profit/loss financial position Presenting accounting for past year Presented to shareholders in Annual General Meeting Audit of accounts is compulsory To assist management in its function of decision making ,planning, etc. Presenting accounting data during year and for indicating future trend Presented to management and Board of directors Audit of accounts is not compulsory

7. Financial accounting Management accounting Useful for shareholders, creditors, bankers, investors, etc. Requires knowledge of accountancy only Scope of financial account is limited Useful to management/Board of directors/Top management officials Requires knowledge of accountancy, Maths , Statistics, Economics, etc. Scope of management account is wider

8. Scope Financial accounting Cost accounting Budgeting and forecasting Cost control procedure Statistical methods L egal provisions Organization & method

9. functions Modification of data Analysis & interpretation of data Facilitating Management control Formulation of business budgets Use of qualitative information

10. Limitations This system mainly relies upon the information of financial and cost accounting. If these are wrong, defective or of error, then decision may lead to wrong direction. This system is a tool to help management. It cannot take place of effective management. To introduce this system is an expensive activity for small units. As this system is very wide, one cannot take quick and exact decision. Management accountant should have knowledge of accounting, Statistic, Economical, Mathematics etc.