MANAGEMENT ACCOUNTING

Made by: Nalin BBA 2nd yr.

Contents
Introduction Definition Financial Accounting VS Management Accounting Advantages Disadvantages

Introduction
The term Management accounting was first coined and used by the British Team of Accountants that visited the United Stats in 1950 under the auspices of AngloAmerican Productivity Councils. Since, then the term has become quite familiar in U.S.A. as well as other countries.

According to Institute

of C.A. Wales-

Any form of Accounting which enables the business to be conducted more efficiently can be regarded as management accounting.

Financial A/C V/S Management A/C Basis of Financial Management Difference Accounting Accounting
Meaning
Usage Accounting Principles
It is system of recording, classifying, and summarizing the accounting information of a system. Mainly used for external use. It aims to provide accounting information useful to management. Internal use by the management. No set of rules or principles to be followed. Management Accounting statements can not be audited because it is analytical in nature.

Prepared according to certain set of accounting principles. Financial accounting statements can be audited.

Audit

Publication Its final results are

published.

Its final results are not published.

Legal Compulsion

The preparation of financial accounts is legally compulsory.

The preparation of management accounts is not legally compulsory.

ADVANTAGES
Facilitates Performance: Management accountant
facilitates performance through various control devices such as budgetary control and standard costing.

Enhances Efficiency: Management accounting

enhances efficiency of different business activities. Through various control devices, performance is better assessed and this increases efficiency.

Effects Better Control: Various techniques of

management accounting help in effective control of different business operations. The principle of targetsetting assists management in effecting better control.

Results in Improved CustomerRelationship: This installation of various types of

control in accounting areas result in cost reduction and finally in price reduction. The customer gets quality products at competitive prices. This result in improved customer relationship.

DISADVANTAGES
Based on Financial & Cost Accounts: As Management
accounting derives its information from financial accounting, cost accounting and other records, therefore, the strength and weakness of management accounting depends upon the strength and weakness of these records.

Management Accounting does not provide Decisions: Management Accounting can only inform, not prescribe,
Management Accounting is just like a Map. As a Map can only tell a traveler where he will get to if he travels in one direction, but not where he should go accounting in relation to decision-making on the part of the management.

 Expensive: The installation of

management accounting system in a business enterprise requires a large amount of money. Hence the utility of this system is restricted to only big and complex organization which can afford it.

Any Query ???.........

Thank

U..