Introduction to Management Accounting


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Management Accounting intro with special reference to Financial and Cost Accounting


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Introduction to Different Accounting Systems: 

Introduction to Different Accounting Systems By: Dr. Sudhendu Giri Asst. Professor SRIRAM Institute of Management, Greater Noida

What is Management Accounting: 

What is Management Accounting The Accounting System which is prepared for the Help of Management to plan the activity, evaluate performance, ensure integrity of the financial information to the Organization can be considered as “MANAGEMENT ACCOUNTING”.

Definition of Management Accounting: 

Definition of Management Accounting “ Any form of Accounting, which enables a business to be conducted more efficiently , can be regarded as Management Accounting”. -BY-I Institute of chartered Accountants,England “Management Accounting is concerned with Accounting Information that is useful to Management.’. BY– R.N. Anthony. “ Management Accounting includes the methods and concepts necessary for effective planning, for choosing among alternative business actions and for control through the evaluation and interpretation of performances”. BY– American Accounting Association.

Function of Management Accounting: 

Function of Management Accounting

Difference between Management Accounting and Financial Accounting: 

Difference between Management Accounting and Financial Accounting Financial Accounting is governed by Company law, whereas Management Accounting depends upon the need of Managers. Financial Accounting performs the basic functions such as Recording, Classifying, Summarising and interpretation whereas Management Accounting deals with the Decision Making, Controlling and informing the Management about necessary Planning. The users of Financial Management are external whereas the users of Management Accounting are mainly internal. Financial Records are publicly available but Management Records are confidential. The main emphasis of Financial Accounting is on Explanation and the Management Accounting emphasises on Planning and Control. Nature of Data used by Financial Accountants are purely Technical whereas the Management Accounting Data is according the need of non- accountants .

Introduction to Financial Accounting: 

Introduction to Financial Accounting Accounting is rightly been termed as the language of BUSINESS. The basic function of a language is to serve as a means of communication. Accountancy also serves this function, it communicates the results of Business Operations to various Parties who have some stake in the business viz. the proprietor, Creditors, Investors, Government and other agencies. The function of the FINANCIAL ACCOUNTING is to provide quantitative information primarily of financial nature about economic activities that is to be useful in making economic decisions. Financial Accounting is the Base of Whole Accounting System which provides the necessary information to every level of Management .

Definition of Financial Accounting: 

Definition of Financial Accounting “Accounting is the science of recording and Classifying business transactions and events, primarily of a financial character and the art of making significant summaries, analysis and interpretation of these transactions and events and communicating the results to persons who must take decisions or form judgements.” BY- Smith and Ashburn “Accounting is the recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part, at least of a financial character and interpreting the results thereof”. BY– American Institute of Certified Public Accountants .

Purpose of Financial Accounting: 

Purpose of Financial Accounting To keep the Systematic Record of Business Transaction. Calculation of Profit and Loss of the Business. To depict the financial position of the Business. To provide information to various Parties:-- Proprietors Management. Helpful to Planning. Helpful to Decision Making. A tool for control. -- Investors. -- Employees. -- Government. -- Banks.

Functions of Financial Accounting: 

Functions of Financial Accounting

Definition of Cost Accounting: 

Definition of Cost Accounting “Cost Accounting is defined as a system of recording in accounts the materials used and labour employed in the manufacture of a certain commodity or on a particular job.” By-R.N. Carter. “By Cost Accounting is meant a specialist application of the general principles of accounting in order to ascertain the cost of producing and marketing any unit of manufacture of of carrying out any particular job or contract.” BY—L. B. Cropper . “Cost Accounts are a system of Accounting whereby expenditure is analysed to find the total cost of each particular unit of production with a reasonable degree of accuracy and to show how such cost is made up”. BY—R.R. Gupta.

Objects of Cost Accounting: 

Objects of Cost Accounting

Difference Between Management Accounting and Cost Accounting.: 

Difference Between Management Accounting and Cost Accounting. The primary objective of Cost Accounting is to determine and to record the cost per unit of products and services. But Management Accounting emphasis upon the representation of Cost Data or information for helping management in the efficient operation and performance of managerial functions. Cost Accounting is at maximum, based on past and present facts and figures, while Management Accounting deals with future projections and plans. Both the external and internal parties are interested in the data and facts provided by Cost Accounting, but the information provided by Management Accounting is useful only to the MANAGEMENT. Certain principles, procedures and proformas are followed in the system of Cost Accounting. But no such principles and procedures are being used in Management Accounting, they can necessary changes according to nature which varies concern to concern.

Dr. Sudhendu Giri: 

Dr. Sudhendu Giri Thank You