RSHBBA207171022215134

Management Accounting
Course Code - BBA - 207
Associate Professor
Dr. Reema Sharma
Department of Management Sciences
Tecnia Institute of Advanced Studies
What are we going to discuss?
Unit 1:
•Introduction: Meaning, Objectives, and Scope of management
accounting; Difference between financial accounting, cost accounting
and management accounting; Comparative financial statements,
common size financial statements, trend analysis, Ratio analysis, cash
flow statement.
Unit 2:
• Budgetary Control and Variances: Concept and types of budgeting
and budgetary control; meaning, objectives, merits, and limitations of
budgetary control; budget administration; Functional budgets
including cash budget; Fixed and flexible budgets: meaning and
preparation; Zero-based budgeting; Performance budgeting,
difference between performance & traditional budgeting. Meaning of
Variance and Variance Analysis – Material, Labour, Overheads and
Sales Variances, Disposition of Variances, Control Ratios. .
2
• Unit 3: (14 Hours) Costing and Profit Planning:
Meaning of Variable Costing, Absorption Costing
and Marginal Costing; uses of Marginal costing;
Cost-Volume-Profit Analysis, Profit/Volume ratio,
Break-Even Analysis - Algebraic And Graphic
Methods, Angle of Incidence and Margin of Safety.
• Unit 4: (14 Hours) Managerial Decision

Making:Decision making based on Marginal Cost
Analysis - profitable product mix, Make or Buy,
Addition or Elimination of a product line, sell or
process further, operate or shut down Managerial
Decision-making using spreadsheets.
3
Activities
• Lectures
• Case studies discussions
• Presentations
• Numerical
• Quiz
• Project Work
• Video Lectures
4
Textbooks
• Maheshwari, S.N.,Principles of Management

Accounting, Sultan Chand & Sons.
• Khan M.Y., Management Accounting, McGraw Hill

Education.
• Arora, M.N., Cost Accounting, Vikas Publishing House.
• Lal, Jawahar and Srivastava, Seema, Cost Accounting,

McGraw Hill.
•.
5
Reference Books
• Bhattacharya, Management Accounting, Pearson Education.

• Hilton R. W., Managerial Accounting, McGraw Hill Education
6
Unit - 1
What is Management Accounting?
Accounting for Planning, Control, and

Evaluation
Key Learning Objectives
• Understand how managers can use • Describe modern management

accounting information to trends changing the role of
implement strategies. accounting in organizations.
• Define the four types of accounting • Discuss the differences between

systems and relate them to their four financial, cost and management
organizational roles. accounting.
• Understand managerial accountants’

professional environment.
Why Do We Have Accounting Systems?
• Accounting systems are artifacts. They are created by men

to help accomplish tasks. Audited statement reduce
investors risk.
• Audited statements allow a company to borrow capital from
someone else.
• Records and internal financial controls safeguard the company’s
assets
• Balance Sheets allow the comparison of Assets, Liabilities and
Owner’s Equity.
• Income Statements describe the change in Owners’ Equity from
operations.
Needs Determine the Form of Accounting
Data
• Managers need changing information to meet changing needs!
• Types of Accounting Systems
• Financial Accounting
• Rules and procedures
• Accounting information systems and internal controls
• Auditing
• Cost Accounting
• Product costing
• Activity-based costing
• Management Accounting
• Decision support
• Organizational control
• Cost management
• Profit management
• Investment management
• Tax Accounting
• Individuals
• Partnerships and corporations
• Estate and trusts
• International taxation
• Special tax issues and topics
• Regulated Accounting Systems
• Financial Accounting or Generally Accepted Accounting Principles
(GAAP). Provide the basis for traditional accounting information
systems and internal controls.
• Tax Accounting. This is the collection of data to meet rules set by
Congress and enforced by the Internal Revenue Service (IRS).
• Fund Accounting. An accounting system designed to provide
governance information for government agencies and not-for-profit
organizations.
• Cost Accounting. This aspect of cost accounting is to comply with
rules set by the Federal government for government contractors.
Rules set by the Cost Accounting Standards Board (CASB).
The Three Management Functions
• Questions asked: • Management functions:

• What do I want to do? • Planning for the future
(Strategic)
• How can I do it? • Planning for the future
(Operational)
• Am I getting it done? • Monitoring and controlling
the present
• How well did I do it? • Evaluating the past
14
How Managerial Accounting Works
• Managerial accounting encompasses many facets of

accounting aimed at improving the quality of information
delivered to management about business operation metrics.
Managerial accountants use information relating to the cost
and sales revenue of goods and services generated by the
company. Cost accounting is a large subset of managerial
accounting that specifically focuses on capturing a
company's total costs of production by assessing the
variable costs of each step of production, as well as fixed
costs. It allows businesses to identify and reduce
unnecessary spending and maximize profits.
15
New Management Trends to Create Value
• Encourage Management Accounting Systems Redesign, for

example.
• Customer focus
• Quality focus
• Delivery focus
• Outsourcing and the virtual company
• Communications
• Shortening product life cycles
• Team development
• Deregulation in the service sector
Managerial Accounting Systems: Unregulated
• Decision Support — Management accounting data has

value if it improves management decisions.
• Control Support — Management accounting data reports
the results of management actions, thus it is useful for
control if management behavior is influenced by the
accounting reports.
WHAT GETS MEASURED GETS DONE!

SUITABLE CONTROL MOTIVATES GOOD JUDGEMENT
GOOD JUDGMENT REQUIRES GOOD INFORMATION!
The Professional Management Accountant
• Professional Certifications
• Certified Public Accountant (CPA)
• Certified Management Accountant (CMA)
• Certified Internal Auditor (CIA)
• Certified Information Systems Auditor (CISA)
• Certified in Financial Management (CFM)
• Chartered Accountant (CA)
19
Objective of Management Accounting
• The main objective of management accounting is to

assist the management of a company in efficiently
performing its functions:
• Planning
• Organizing
• Directing
• Controlling.
Management accounting helps with these functions in
the following ways:
20
• 1. Provides data: It serves as a vital source of data for planning.
The historical data captured by managerial accounting shows the
growth of the business, which is useful in forecasting.
• 2. Analyzes data: The accounting data is presented in a meaningful

way by calculating ratios and projecting trends. This information is
then analyzed for planning and decision-making. For example, you
can categories purchase of different items period-wise, supplier-wise
and territory wise.
• 3. Aids meaningful discussions: Management accounting can be

used as a means of communicating a course of action throughout the
organization. In the initial stages, it depicts the organisational
feasibility and consistency of various segments of a plan. Later, it tells
about the progress of the plans and the roles of different parties to
implement it.
21
• 4. Helps in achieving goals: It helps convert
organizational strategies and objectives
into feasible business goals. These goals can be
achieved by imposing budget control and standard
costing, which are integral parts of management
accounting.
• 5. Uses qualitative information: Management

accounting does not restrict itself to quantitative
information for decision-making. It takes into
account qualitative information which cannot be
measured in terms of money. Industry cycles,
strength of research and development are some of
the examples qualitative information that a
business can collect using special surveys.
22
Scope of Management Accounting
• Its scope is quite vast and includes several business
operations. The following points discuss what management
accounting can do to make a business run better.
• 1. Managerial accounting is a rearrangement of information
on financial statements and depends on it for making
decisions. So the management cannot enforce the
managerial decisions without referring to a concrete
financial accounting system.
• 2. What you can infer from financial accounting is limited
to numerical results like profit and loss, but in management
accounting you can discuss the cause and effect
relationships behind those results.
23
• 3. Managerial accounting uses easy-to-understand
techniques such as standard costing, marginal
costing, project appraisal, and control accounting.
• 4. Using historical data as a reference, the
management observes the current information to
check the impacts of business decisions.
• 5. Management can use this type of accounting to
set objectives, format plans to meet them, and
compare the performance of various departments.
• 6. Managerial accounting is used for forecasting. It
concentrates on supplying information that would
ease the effect of a problem rather than arriving at
a final solution.
24
Thank You
25

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Management Accounting

Course Code - BBA - 207

• Unit 4: (14 Hours) Managerial Decision

• Case studies discussions

• Maheshwari, S.N.,Principles of Management

• Khan M.Y., Management Accounting, McGraw Hill

• Arora, M.N., Cost Accounting, Vikas Publishing House.

• Lal, Jawahar and Srivastava, Seema, Cost Accounting,

• Bhattacharya, Management Accounting, Pearson Education.

Accounting for Planning, Control, and

• Understand how managers can use • Describe modern management

• Define the four types of accounting • Discuss the differences between

• Understand managerial accountants’

• Accounting systems are artifacts. They are created by men

• Questions asked: • Management functions:

• Managerial accounting encompasses many facets of

• Encourage Management Accounting Systems Redesign, for

• Decision Support — Management accounting data has

WHAT GETS MEASURED GETS DONE!

• The main objective of management accounting is to

• 2. Analyzes data: The accounting data is presented in a meaningful

• 3. Aids meaningful discussions: Management accounting can be

• 5. Uses qualitative information: Management

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