BBA II

1. Management Accounting

2. Introduction :
 Accounting is the language of business
employed to communicate the financial
information to various parties who are
interested in the information. Accounting
can broadly be classified into three
categories.
 Financial accounting
 Cost accounting
 Management accounting

3. Meaning
 Management accounting is concerned with
accounting information that is useful to
management.
 The process of identifying, measuring,
analyzing, interpreting, and communicating
information for the pursuit of an
organization's goals.

4. Conti…
 The key difference between managerial
and financial accounting is that
managerial accounting information is
aimed at helping managers within the
organization make decisions. In
contrast, financial accounting is aimed at
providing information to parties outside
the organization.

5. Characteristics and Nature of
Management Accounting :
 Helpful in Decision Making:-It is an
important feature of management accounting.
In fact, it helps the management of
organization by providing relevant and
accurate information from various sources
(like financial and cost accounting) in order to
make sound decisions to remove business
problems.

6. Conti…..
 Provides Data, Not the Decision:- It only
provides required data and information to the
management, not the decision.
 Assist in Achieving Objectives:-
Management Accounting is always assist
organization in achieving its predetermined
goals. Because it provides detailed
information in regarding the weakness and
the strength of organization in the form of
report,

7. Conti..
 Related to Future:- Management Accounting is
an accounting system which is directly related
to future course of events. It means by
preparing this account any organization can
forecast its future on the basis available
information in relating the past events.
 Use of Special Techniques:- Management
Accounting uses special tools or techniques
(like standard costing, budgetary control,
control accounting, marginal costing etc) for
composing the accounting information and data
more accurate and relevant.

8. Functions or Objectives of
Management Accounting :
 Planning and forecasting – Information and date
provided by management accounting helps
management to forecast and prepare short-term
and long term plans for the future activities of the
business and formulate corporate strategy.
 Financial analysis and interpretation: In order to
make accounting data easily understandable, the
management accounting offers various techniques
of analyzing, interpreting and presenting this data in
non-accounting language so that every one in
organization understands it. Ratio analysis, cash
flow and funds flow statements trend analysis, etc.,
are some of the management accounting
techniques which may be used for financial analysis
and interpretation.

9. Conti…
 Qualitative information: Apart from monetary
and quantitative data, management
accounting provides qualitative information
which helps in taking better decisions. Quality
of goods, customers and employees, legal
judgments, opinion polls, logic, et, are some
of the expels of qualitative information
supplied and used by the management
accounting system for better management.

10. Conti..
 Decision – Making: Correct decision making
is crucial to the success of a business.
Management accounting has certain special
techniques which help management in short
team and long term decisions. For example,
techniques like marginal costing, differential
costing, discounted cash flow, etc., help in
decisions such as pricing of products, make
or buy, discontinuance of a product line,
capital expenditure, etc.

11.  Furnishes Relevant data : Management
accounting furnishes the Relevant data and
information in way required by the management
to assist them in taking and controlling various
decesion.
 Controlling: Controlling is a very important
function of management and management
accounting helps in controlling performance by
control techniques such as standard costing,
budgetary control, control rations, internal audit,
etc.

12. Need and Importance of
M.A :
 Determine of Aim: Management accounting
on the basis of the information available
determines its goal and tries to find out the
route through which it can reach the goal.
 Helps in the Preparation of Plan: Present
age is the age of planning. That producer is
considered as most successful producer who
produces articles according to the plan and
needs of the consumers.

13. Conti….
 Better Services to Customers: The cost
control device is management accounting
enables the reduction in prices of the Product.
All employees in the concern are made cost
Conious.
 Easy to take judgment: Before taking any
plan or to determine policy. There are several
plans or policies before the management on
the basis of the study he decides which plan
and policy was to be adapted so that it may be
more useful and helpful.

14. Conti..
 Measurements of performance: The
techniques of budgetary control standard
costing enables the measurement of
performance In standard costing, standards are
determined 1st and then actual cost of
compared with standard cost. Budgetary
control system too helps in measuring
efficiency of all employees.

15. Conti..
 Its Increase Efficiency of the business:
Management accounting increases efficiency of the
business concern. The targets of different
departments of the enterprise are determined in
advance and the achievement of these goals is
taken as a tool for measuring their efficiency.
 Maximum profits of can be obtained: In this
process every possible effort are made to control
unnecessary expenses. The incapability or
inefficiency is removed. New systems or techniques
are found out to achieve the goal, so that there may
be maximum profits out if the capital invested in the
Business.

16. Limitations of Management
Accounting
 Lack of knowledge: For taking a sound
decision it is necessary that the management
must have knowledge of various fields like
accounting, statistics, economics, taxation,
production, engineering and so on.
 Lack of continuity and Co-ordination: In order
to make the conclusions drawn by management
accountant meaningful, they must be
implemented in the organisation at various
levels. But in actual practice they loose their
significance because it is not feasible to
implement such conclusions.

17. CONTI…
 Lack of objectivity: There are every possibility
of personal bias and manipulations from the
collection of data to the interpretation stage in
financial accounting. Thus, it looses objectivity
and validity.
 Costly: The Installment of management
accounting system in a concern requires large
organisation and a wide net work of rules and
regulations and thus requires a heavy
investment.

18. CONTI…
 It is based on Financial Accounting:
Whatever information the management
according gets, They are of the financial
accuracy of the management decisions is based
on the correctness of these information. If
financial data is not reliable then management
accounting will not provide correct analysis. this
effectiveness limited to the reliability of those
sources.

19. Similarities Between Management
accounting and Financial accounting
 Both financial and managerial accounting methods
present the general health of a business.
 Financial accounting reports are more formal and
have a strict format for presentation to external
stakeholders. Managerial accounting reports are
more informal since they are used in-house. But
even with these differences, both methods allow
the reader to make a conclusion on the health of
the business, allowing them to make financial
decisions that must be made.

20. Difference Between Management
accounting and Financial accounting
1. Financial accounting is used to generate reports and
statistics to detail a company's financial health to
external interests.
Managerial accounting is completed for internal
stakeholders, such as the management team.
2. These external parties include stockholders, silent
partners and mortgage holders.
This information would be used to determine sales
prices, employee bonuses, raises for employees and
other general operation decisions

21. Conti…
Topics &
No.
Financial Accounting Management Accounting
1. Meaning The process of recording,
summarizing and reporting the
myriad of transactions from a
business, so as to provide an
accurate picture of its financial
position and performance
The process of preparing
management reports and
accounts that provide accurate
and timely financial and statistical
information required by
managers to make day-to-day
and short-term decisions.
2.
Objectives
The main objectives of financial
accounting are to disclose the end
results of the business, and the
financial condition of the business
on a particular date.
The main objective of managerial
accounting is to help
management by providing
information that is used to plan,
set goals and evaluate these
goals.
3. Optional It is legally required to prepare
financial accounting reports and
share them with investors.
Managerial accounting reports
are not legally required

22. Conti..
4. Segment
Reporting
Pertains to the entire
organization. Certain figures
may be broken out for
materially significant business
units.
Pertains to individual
departments in addition to the
entire organization.
5. Focus Financial accounting focuses on
history; reports on the prior
quarter or year.
Managerial accounting focuses
on the present and forecasts for
the future.
6. Format Financial accounts are reported in
a specific format, so that different
organizations can be easily
compared.
Format is informal and is on a
per department/company basis
as needed.
7. Rules Rules in financial accounting are
prescribed by standards such as
GAAP or IFRS. There are legal
requirements for companies to
follow financial accounting
standards.
Managerial accounting reports
are only used internally within the
organization; so they are not
subject to the legal requirements
that financial accounts are.

23. Conti…
8. Reporting
frequency and
duration
Defined - annually, semi-annually,
quarterly, yearly.
As needed - daily,
weekly, monthly.
9. Information
Monetary, verifiable information.
Monetary and company
goal driven information.

24. References/Sources
 Accounting for Managers by Dr. Sakshi Vasudeva Galgotia
Publishing Company Chapter 14 Management Accounting an
Introduction page no. 417

25. Thank U