Module I

Management Accounting: Nature and Scope - Difference between cost

Accounting, Financial accounting and Management accounting - Recent
trends in Management Reporting

MANAGEMENT ACCOUNTING
 Management Accounting
▪ It is the accounting technique which may be
helpful to management in planning, decision
making, and control.

▪ it is a system of A/C which helps the management

in carrying out its functions more efficiently

▪ According to Robert Anthony “Management A/C

is concerned with accounting information
accounting information which is useful to
management”
 Management Accounting
▪ According to Anglo-American Council of
Productivity (1950) "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".
Nature/Characteristics of Mgnt A/C
▪ Provides accounting information → To the
management
▪ Decision making →
▪ Studies cause and effect relationship →
▪ Uses special techniques and concepts →
▪ Quantitative & qualitative information →
▪ Multi – disciplinary → It contains Financial A/C,
Cost A/C, statistics, economics, …….
▪ Accounting for future → Future planning
▪ Assist management →
▪ Increase efficiency →
SCOPE OF MANAGEMENT ACCOUNTING
(i) Financial Accounting
(ii) Cost Accounting
(iii) Revaluation Accounting
(iv) Budgetary Control
(v) Inventory Control
(vi) Statistical Methods
(vii) Interim Reporting
(viii) Taxation
(ix) Office Services
(x) Internal Audit
(xi) Management Information System [MIS]
 BASIS FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING

Objectives It is designed to supply information Management Accounting is

in the form of profit and loss account designed principally for
and balance sheet to external parties providing accounting
like shareholders, creditors, banks, information for internal use of
investors and Government the management
Analyzing Business as a whole Give attention to the various
performance divisions, departments of the
business
Data used monetary record of past events (It is It is for future (present and
a post-mortem analysis of past future duly analyzed in detail)
activity)
Monetary Monetary events only Both monetary & non-
measurement monetary economic events are
measured
Periodicity of Yearly frequent intervals
reporting
Nature More objective More subjective

Legal Compulsory for every business Free to install or not

compulsion
 BASIS COST ACCOUNTING MANAGEMENT ACCOUNTING
Nature To providing cost information It provides all type of
information
Emphasis Cost ascertainment and cost Mainly on planning,
control controlling and decision
making
Scope Narrow Wide

Techniqu Standard costing, marginal All the techniques of cost A/C

es used costing, cost volume profit but in addition it also uses
analysis, budgetary control ratio analysis, fund flow
etc……………….. analysis, statistical analysis
etc…….
Evolution Due to the limitations of Due to the limitations of cost
financial A/C A/C
Legal Compulsory in selected Voluntary and depends upon
requirem industries as notified by the the management
ents gvt
 RECENT TRENDS IN MANAGEMENT REPORTING
1. Financial reporting using IFRS
❖ International Financial Reporting Standards [IFRS] is recognized as
global financial reporting standards
2. Interim Reporting
❖Interim Reporting is the reporting of financial results of any period
that is shorter than a fiscal year (Eg - quarterly basis)
3. Segmental Reporting [AS-7]
❖ It is the reporting of the operation segments of a company
4. Corporate Governance Report
❖SEBI regulates governance practices of companies listed on Stock
Exchanges
5. Reporting of Information Relating to Group
Companies [AS 21]
❖AS 21 requires companies to prepare consolidated Financial
Statements
6. Cash Flow Reporting →
❖ SEBI had issued a directive to all stock exchanges to include
cash flow information as part of listing agreements.
7. Management Discussion and Analysis Report →
❖ some companies follow different analysis repot with their
financial reports
8. Use of charts, graphs, and diagrams →
MODULE@1 → THE END

Thank you
Niyaf Ramapuram
niyafmnc@gmail.com