Scope & Application-2

8/12/2019 Scope & Application-2

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SCOPE and APPLICATION of

COST & MANAGEMENT

ACCOUNTING

PRESENTED BYAHMED SAYEM,

Associate Professor

Dept. of IPE, SUST.


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Accounting for the management.

It provides necessary information toassist the management in the creation

of policy and in day today operations.It enables the management to

discharge all its functions.

MANAGEMENT ACCOUNTING -Meanings


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DEFINITION:

1. According to R.N. Anthony:Management accounting is concerned

with accounting information's to the

management

2. American Council of productivity:

Management accounting is the presentationof accounting in such a way to assist the

management in the creation of policy and in

day today operations of an undertaking


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OBJECTIVES of Management Acc

To assist the management in promoting efficiency.

To prepare budgets covering all functions of a business.

To analyse monetary & non monetary transactions.

To compare the actual performance with plan & identifying

variations and its causes.

To interpret the financial statements to formulate future policies.

To submit the results to the management at frequent intervals.

To provide a suitable organisation for discharging responsibilities.

To arrange systematic allocation of responsibilities for the

implementation of plans & budgets.


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SCOPES of Mgt. Acc

The scope of management accounting is very wide.Itincludes all aspects of business operations. The following

areas indicating scope of management accounting.

Financial accounting:

It provides historical information. It forms basis for future

securing full control & coordination of a business.

Cost accounting:

It provides various techniques of costing. It assisting the mgt

in the formulation of policies & the operations of the

undertakings.


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Statistical methods:

Statistical tools like graphs,charts,index numbers etc.are used forpresentation of information to various departments.

Taxation:

It includes preparation of income statement,assessing the effect of

tax on capital expenditure, proposal & pricing.

Internal audit:

This refers to the establishment of a suitable internal audit system

for internal control.

Office services:

They cover a wide range of activities like data processing,filing,

copying, printing, communication etc.


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Decision-making

Deals with whether it is more profitable to

make or buy a component, determine the

economic order quantity and production

batch size, replace fixed asset, add or drop

products, decide pricing.


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ApplicationCost accounting has extended frommanufacturing operations to a variety of

service industries such as hotels, bands,

airline, etc

Cost accounting system should be flexibleand adaptable to meet the new business

environment and the changing nature of the

com an


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FUNCTIONS:

Functions of management accounting.It includes all activities connected with

collecting,processing,interpreting and presenting

information to the management.main functions are

listed below:Forecasting:

Making short term & long term forecast and planning the future

operations of the business.

Organising:Organising human & physical resources of the business.it is done

by assigning specific responsibilities to different people.

Co-ordinating:

Providing different tools of coordination like budgeting,financial

reporting,financial analysis and budgetary control.


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Controlling:

controlling performance by using standard costing, varianceanalysis and budgetary control.

Analysing and interpreting:

Analysing and interpreting of data in a simple and purposeful

manner.

Communicating:

Communicating the results of business activities through prompt

and accurate reporting system.

Economic appraisal:

appraising of social and economic forces and government

policies and interpreting their effect on business.


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Difference between Management

accounting & Financial accounting

Objective

Performance AnalysisData Used

Nature

AccuracyLegal Compulsion

Monetary Transactions

Control


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Difference between management

accounting and financial accounting Management accounting

Management accounting is to

provideinformation forinternal use of themanagement.(Depts.,Mgt)

It analyses the performanceand profitability of each

department.(Individually) It is mainly concerned with

future plans and policies.

It is based on judgment and

more subjective.

Financial accounting

Financial accounting is to

provideinformation forexternal use of themanagement(Sh.hol,Crs,Govt).

It is concerned with overallperformance of the

concern.(Totally) It is mainly concerned with

recording of past transactions.

It is based on measurement and

more objective.


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Approximations are widelyused.Because most of theinformation is related to thefuture and intended for internaluse.

Preparation of accounts is

optional. It records both monetary as

well as non monetary eventscalled technical changes,government policies.

It reveal the deviations ofactual and budgeted.It will alsoindicate the causes for such

deviations

Accuracy is an important

factor. Because all theinformation is related to the

past and intended for external

use.

It is compulsory for all joint

stock companies.

It records only those

transactions which can be

expressed in terms of money.

It will not reveal whether plans

are properly implemented.


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Difference between Cost accountingand management accounting.

Objective

Scope

Data usedNature


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Difference between Cost accounting

and management accounting. Cost accounting

The ascertainment and

control of costs of productsand services

It deals primarily with cost

data.It includes the processof accumulation,

classification,analysis and

recording.The scope of cost

accounting is limited.

management accounting

The supply of informationto

the management to takedecisions,planning andcontrol.

It deals with both cost andrevenue.It includes

financial,cost,budgeting,reporting,to managementand interpretation offinancial data. The scope ofmanagement accounting is

wider.


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In cost accounting onlythose transactions which

can be expressed in

figures are

taken.i.e.quantitative

aspect is recorded in cost

accounting.

Cost accounting uses bothpast and present figures.

In management accounting

the transactions which can

be expressed in figures and

values are taken. i.e.Bothquantitative and qualitative

aspects are recorded in

management accounting.

Management accounting isconcerned with the

projection of figures for

future

Documents

Scope & Application-2