Download Managerial Accounting

Principles of Managerial Accounting
ACCT -104
1
Syllabus
Fundamental of Managerial Accounting – Meaning, Definition and objectives of
Managerial Accounting. Distinction between Financial and Managerial Accounting.
Distinction between Managerial and Cost Accounting.
Analysis and Interpretation of Financial Statements-I –
Analysis of Financial
Statements, Form of Income Statement & Balance Sheet and persons interested in
Financial Statements; Comparative Financial Statements, Common Size Statement.
Ratio Analysis- Meaning of ratio, importance of ratio analysis, classification of ratios
and calculation of various ratios, Du Pont Analysis.
Cost Volume Profit Analysis-I Cost Drivers, Variable & Fixed Cost Behaviour,
Difficulties in classifying Costs.
Cost Volume Profit Analysis-II Cost Volume Profit Analysis, Break Even Point,
Margin of Safety.
2
Assessment
Assessment
Assessment Task
No. of
Times
Proportion of
Final Grade
1.
Assignment
3
10%
2.
Quizzes
3
10%
3.
Mid Term Examination - I
1
15%
4.
Mid Term Examination -II
1
15%
5
Presentation
1
10%
6.
Final Examination
1
40%
100%
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What is Managerial Accounting?
• It is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and
communicating information that managers use to fulfill organizational objectives.
• The branch of accounting that produces information for managers within an organization is termed
as Managerial Accounting.
• The term Managerial accounting refers to accounting for the management, i.e., accounting which
provides necessary information to the management for discharging its functions. The functions of
the management are planning, organizing, directing and controlling.
• Thus, Managerial accounting provides information to management so that planning, organizing,
directing and controlling g of business operation can be done in an orderly manner.
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Definition of Managerial Accounting

The Institute of Chartered Accountants of England and Wales: “Managerial
Accounting is any form of accounting which enables a business to be conducted
more efficiently can be regarded as Managerial Accounting.”

According to Robert Anthony: Managerial Accounting is concerned with accounting
information which is useful for management.

The Anglo-American Council : “Managerial Accounting is the presentation of
accounting information in such away as to assist management in the creation of
policy and in the day –to –day operations of an undertaking.”
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Characteristics of Managerial Accounting
•
Selective Nature
•
It does not Provide Decision
•
It is concern with Future
•
Managerial Accounting Studies causes & effects
•
Not bounded by the sets of rules of financial accounting
•
Concerned with the Problem of Choice
•
Nature of various elements of costs
•
It modifies, analyses and interprets data.
Objectives of Managerial Accounting
•
To help in Planning
•
To help in Organizing
•
To help in Controlling
•
To help in communicating
•
To help in decision making
•
To help in coordination
•
To help in solving business problems
•
To help in motivating employees
•
To help in interpreting financial information
Managerial accounting is thus helpful to the management in every field of activity. This is the reason why
management accountant is considered not only a service arm to management but also a part of management.
Tools and Techniques of Managerial Accounting
•
Financial Planning
•
Analysis of Financial Statements
•
Historical Cost Accounting
•
Standard Costing
•
Marginal Costing
•
Fund Flow Statements
•
Budgetary Control
•
Decision Making Accounting
•
Statistical Techniques
Limitation of Managerial Accounting
• Based on Traditional Accounting
• Knowledge of other related subjects
• Continuity and Participation
• It does not provides decision
• It is not an alternative of management
• Evolutionary stage
• Human Opinion
• Broad based scope
• Costly installation
• Lack of Coordination in operation
User of Information
Financial Information
Investors
Creditors
Bankers
Government authorities
Purpose:
Help investors, creditors, and
others
make
investment,
credit, and other decisions
Management Information
Managers
Owner
Employees etc
Purpose:
Help managers plan
and control business
operations
Distinction between Financial
Accounting and Managerial Accounting
Financial Accounting:
It is systematic knowledge and the art of recording business transaction in the books
of business. It is a basic accounting which helps the persons to know financial
position of business concern.
Managerial Accounting:
It is the process of identifying, measuring, accumulating, analyzing, preparing,
interpreting, and communicating information that managers use to fulfill organizational
objectives
Differences between Financial Accounting and Managerial Accounting
Base
Financial Accounting
Managerial Accounting
Financial accounting is the art of recording,
classifying and summarizing in a significant
manner and in terms of money transactions
Managerial Accounting is concerned with
accounting information which is
useful to management
The main object of financial accounting is to prepare
periodical reports to outsiders.
The
Functions
The functions of financial accounting are to record
and collect financial data. It summarizes the
data in the form of accounts.
Managerial
accounting picks up
significant data out of collected data
and presents them for the use of
management.
Address
Financial accounting is generally addressed as
Traditional Accounting or General Accounting
Managerial Accounting is generally
called Accounting for Manager,
Managerial Accounting, Decision
Making accounting.
Nature
Financial Accounting is of historical nature. It
records only those transactions which have
taken place in the past.
Managerial Accounting
future.
Subject
Matter
Financial accounting is concerned with assessing the
result of business as a whole. It shows over all
performance in form of profit through profit
and loss a/c.
Under this system of Managerial
accounting,
different
units,
departments
are
taken
for
assessment. In other work, it deals
with vital activities.
Concept
main objective of Managerial
Accounting is to help internal
management in solving various
problems and decision making.
stresses
the
Cont…..
Differences between Financial Accounting and Managerial Accounting
Base
Financial Accounting
Managerial Accounting
Accounting
Principles
Financial accounting is done according to
certain accounting principles and
double entry system.
No principles and double entry system is
followed in managerial accounting. It
emphasis
on
analysis
and
interpretation.
User of Information
External and external user both
Internal user only
Prescribed Format
Must follow the GAAP and prescribed
format
Need not follow GAAP and prescribed
format.
Legal Compulsion
Financial accounting has more or less
become compulsory for every
business on account of the legal
provisions of one or the other Act
a business is free to install, or not to
install, a system of Managerial
accounting
Scope
Financial Accounting is limited to the
preparation of accounts for use of
external parties. Public is the main
objective financial accounting
Managerial accounting is very wide. It
includes Financial accounting, cost
accounting, statistics etc. It designed
for internal users.
Distinction between Cost Accounting
and Managerial Accounting
Cost Accounting:
Cost Accounting is the process of a accounting for costs which begins with
recording of income and expenditure or the bases on which they are calculated and
ends with the preparation of statistical data.
Managerial Accounting:
It is the process of identifying, measuring, accumulating, analyzing, preparing,
interpreting, and communicating information that managers use to fulfill organizational
objectives
Difference Between Cost Accounting and Financial Accounting
Base
Cost Accounting
Managerial Accounting
Meaning
Cost Accounting is
ascertaining the cost
of
Managerial accounting is one which enables
management in doing its functions efficiently.
Objects
The primary object of Cost accounting is
Managerial accounting is aims at representation of
cost data or accounting information for
management use.
a
process
to determine the records, cost of products
and services.
Scope
The scope of Cost accounting is not wide,
it is apart of Managerial accounting
Managerial accounting has wider scope. It includes
Financial accounting, Cost accounting an
statistics etc.
Principles
Under this system of cost accounting
certain principles are followed.
No principles is followed under the system of
managerial accounting.
Parties
Both parties, internal and external have
interested in costing
Managerial accounting is specially designed for
management or internal use.
Principles
and formats
Cost accountancy have some established
and set accounting principles and formats
it is not so in the case
accounting
of the management
Unit - 1
Descriptive Type Questions
1.
Define Managerial Accounting?
2.
State the objectives of Managerial Accounting.
3.
Write difference between Cost Accounting and Managerial Accounting.
4.
Write difference between Financial Accounting and Managerial Accounting.
5.
Explain Characteristics scope of Managerial Accounting.
6.
State four tools and techniques of Managerial Accounting.
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Home Assignment
1.
What is Managerial Accounting ? State its objectives of Managerial Accounting.
Hint:
•
•
•
•
•
Introduction
Meaning of Managerial Accounting
Definitions of Managerial Accounting
Objectives of Managerial Accounting
Conclusion.
2. Difference between “Managerial Accounting” and “Financial Accounting”.
Hint:
•
•
•
•
•
Introduction
Definitions of Managerial Accounting
Definitions of Financial Accounting
Differences of Managerial And Financial Accounting.
Conclusion.
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HOME ASSIGNMENT – I
Principles of Managerial Accounting (ACCT 104)
Name
: …………………………………………..
University Number:
…………………………………
IST
Group
:
Submitted to
: Auz: Anass hamadelneel
College of Business Administration
Salman bin abdulaziz University,
Alkharj
Kingdom of Saudi Arabia