Submitted by: Submitted by highfi
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Category: Other Topics
Date Submitted: 04/03/2011 11:07 PM
MANAGEMENT ACCOUNTING
What is Accounting?
• Need for Accounting –
o Increased global trade,
o Rise in the complexities of business,
o Large scale, due to Industrial Revolution
• Father of double entry system of accounting – Luca di Bargo Pacioli (Italy, 1494)
• Accounting can be defined as recording, classifying, summarizing, analyzing and interpreting the business transactions.
• The function of accounting is to report to the owners, managers - at regular intervals, about the performance of the entity.
• Accounting facilitates planning & controlling the operations of the business.
• Based on the functions discussed earlier, accounting can be broadly classified into –
– Financial Accounting (i.e. recording financial transactions for the purpose of shareholders, employees, creditors, lenders etc.)
– Management Accounting (it is designed for the operational needs of the business, to provide information relating to various aspects as business for managerial decision making, controlling etc.
Management Accounting
• Simply “Accounting for the Management”
• Providing accurate and timely information for managerial decision making (POSDCORB)
• Use of professional knowledge, updated data and appropriate techniques
• Intense analysis and interpretation of data
• Facilitates day-to-day management as well as future planning and organizing.
Mgt. Accounting Principles –
• Compiling data (records, reports, statements etc.)
• Management by Exception – top management should be involved only in case of exceptional matters.
• Control at Source – costs be controlled at its source
• Integration – integration of mgt. information
• Efficient utilization of resources
• Forward looking approach
• Measuring returns on investment
Techniques of Mgt. Accounting
✓ Cost sheets analysis
✓ Material costs
✓ Overheads costs...