FINANCIAL MANAGEMENT

1. MANAGEMENT ACCOUNTING,
MANAGEMENT ACCOUNTING AS
INFORMATION SYSTEM
Presented By- Shikha Dadka
Suchita Seraphim
Vinita Lakra
Ambarish Nafde
Anup Gunjan Topno
Avinash Kumar
Reetuk Chakraborty
Vinay Prateek B. Ho
Presentation Date- 22/10/13

2. Management Accounting:
• Management Accounting is comprised of two words
management and accounting.
• It is to redesign accounting in such a way that it is helpful to
the management in formation of policy, control of execution
and appreciation of effectiveness.
• According to J. Batty: “Management Accounting is the term
used to describe the accounting methods, systems and
techniques which coupled with special knowledge and
ability, assist management in its task of maximizing profits or
minimizing losses.”
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3. Characteristics or Nature:
1) Providing Accounting Information:- The collection and
classification of data is the primary function of accounting
department. The information so collected is used by
management for taking policy decisions.
2) Cause and Effect Analysis:- Financial accounting is limited to
the preparation of the profit and loss account and finding out
the ultimate result.
3) Use of Special Techniques and Concepts:- Management
accounting uses special techniques and concepts to make
accounting data more useful usually include financial
planning and analysis, standard costing, budgetary control,
marginal costing, project appraisal, control accounting, etc.
4) Taking Important Decisions:- Management Accounting helps
in taking various important decisions. It supplies necessary
information to the management which may base its decision
on it. 3

4. 5) Achieving of Objectives:- The recording of actual
performance and comparing it with targeted figures will
give idea to the management about the performance of the
various departments.
6) Increase in Efficiency:- The purpose of using accounting
information is to increase efficiency of the concern. The
efficiency can be achieved by setting up goals for each
department.
7) Supplies Information and not Decision:- The management
accountant supplies information to the management. The
decisions are taken by the top management.
8) Concerned with Forecasting:- The management accounting
is concerned with the future. It helps the management in
planning and forecasting. The historical information is used
to plan future course of action.
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5. Functions of Accounting Management:
• Planning and Forecasting:- It is to help management in
planning for short-term and long-term periods and also in
making forecasts for the future.
• Financial Analysis and Interpretation:- Management
accountant undertakes the job of presenting the financial
data in a simple way. He analyses and interprets financial
data in a simple way and presents it in a non-technical
language.
• Facilitates Managerial Control:- Management accounting is
useful in controlling performance. The actual performance is
recorded and deviations are calculated. It enables the
management to assess the performance of everyone in the
organization.
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6. • Communication:- Management accounting establishes
communication within the organization and with the outside
world. The activities of the concern, are communicated to
outsiders such as bankers, investors, creditors, government
agencies, etc.
• Use of Qualitative Information:- The field of management
accounting is not restricted to the use of monetary data only.
It collects and uses qualitative information also.
• Co-ordinating:- Management accountant acts as a co-
ordinator among different financial departments through
budgeting and financial repo for smooth running of the
concern.
• Supplying Information to All Levels of Management:- Every
management level needs accounting information for decision
making and policy execution. Management accountant feeds
information to different levels of management so that further
decisions are taken. 6

7. Difference between Management
Accounting and Cost Accounting
۩ Ascertainment of cost &
profitability.
۩ Allocation & absorption of
overheads.
۩ Suggests the best
alternatives.
۩ Deals with establishing the
budget.
۩ Helps in the formulation of
policies.
۩ Purposeful application of
costing techniques.
۩ Considers other non cost
factors.
۩ Deals with the
requirements & use of
principles.
Cost AccountingManagement Accounting
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8. Financial Accounting
• External( Investors,
Government Authorities,
Creditors)
• Primarily concerned with
reporting for the company
as a whole
• Nature of information is
more objective, auditable,
reliable, consistent and
precise
• Concerned more about
adequacy of disclosure
• GAAP, FASB and SEC are the
main restrictors
• Internal( Managers of
Business, Employees)
• Segment reporting is the
primary emphasis
• It is more subjective,
judgmental, viable, relevant
and accurate
• Concerned more about how
reports with affect
employees behavior
• GAAP does not apply, but
information should be
restricted to strategic and
operational needs
Management Accounting
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9. Limitations:
1. • Personal Bias
2. • Psychological Resistance
3. • Lack of Knowledge
4. • Intuitive Decisions
5. • Top Heavy Structure
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10. Management Accounting as
Information System
It is a planned and organized approach to the transferring of
intelligence within an organization for the organization of
management.
Management Accounting Information System needs to be
designed to serve the decision-making needs of the various
levels of management in the organization hierarchy.
Management Information System is an
approach of providing timely, adequate
and accurate information to the right
person in the organization which helps in
taking right decisions.
It is to identify problems and identify
solutions to such problems.
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11. Objectives of Management Accounting
Information System:
 To provide information for
costing services, products,
and other objects of
interest to management.
 To provide information for
planning, controlling,
evaluation, and continuous
improvement.
To provide information for
decision making.
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12. How to Establish a Management
Accounting Information System
• A management accounting information system can help
businesses run better by providing timely information on
internal operations.
• Managers need to have specific data on certain processes to
control costs and to make sound decisions.
• Each company and industry has particular requirements.
Retail management needs will be different from those of a
distribution or a service-type business.
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13. • Step 1: List your needs. Put in writing your requirements and
what you need an information system to do for you. That could
be capturing certain information and reporting in a specific way
and format. Prioritize your needs--what is crucial and what
would be nice to have, but you can live without. Important
needs of management are usually budgeting, cost accounting
and specific variance analysis.
• Step 2: Search for computerized solutions that meet your
needs at about 90 percent. The other 10 percent can be
customized. You can usually find close matches when you
consider systems that are designed for your industry. If you are a
retail business, you may be able to find a point-of-sale system
with all required back-office support software by focusing on
computer systems specialized for retail firms and not wasting
time with manufacturing solutions. Be focused in your search,
otherwise you will end up confused and exhausted.
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14. • Step 3: Consider your budget. Mind your pocketbook. Accounting
management information systems can be very expensive to
purchase and maintain. Be sure you can afford the system that you
need. You may have to scale back your expectations.
• Step 4: Detail a plan to implement a new management system. The
plan should have a time line and be reasonable. Usually firms
underestimate the time required to install and employ a new
system. Don't forget to add training time for users to learn how to
use all functions of a system.
• Step 5: Check in with employees and management. Be sure people
are using and following the management system. To establish a new
system, management and executives need to be completely behind
the system. You need to have full commitment to make it work and
to give you meaningful information.
• Step 6: Utilize the system to its best advantage. Ask for reports and
other status on the system to be sure the management system is
being employed with all its functionality.
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15. Doing Your Best Work
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