Such of its technique and procedures by

which accounting mainly seeks to aid the

management collectively have come to be
known as management accounting
The inst. Of chartered accountants of India
Management accounting is the presentation
of accounting information in such a way as to
assist management in the creation of policy
and the day-to day operation of an
undertaking
Anglo-American Council on productivity



Providing accounting information
Cause and effect analysis
Use of special techniques and concepts
Taking important decisions
Achieving of objectives
No fixed norms followed
Increase in efficiency
Supplies information and not decisions
Concerned with forecasting
Financial accounting
Cost accounting
Financial management
Budgeting and forecasting
Inventory control
Reporting to management
Interpretation of data
Control procedures and methods
Internal audit
Tax accounting
Office services
Planning and policy formulation
Helpful in controlling performance
Helpful in organizing
Helpful in interpreting financial statements
Motivating employees
Helpful in making decisions
Reporting to management
Helpful in co-ordination
Tax administration

Financial policy and accounting
Analysis of financial statements
Historical cost accounting
Budgetary control
Standard costing
Marginal costing
Decision accounting
Revaluation accounting
Control accounting
Management information system



Management Accounting vs. Financial
Accounting
Bases Managerial Accounting Financial accounting
Object to help management in
formulating policies and
plans.
To know the financial
position.

Nature Estimated or projected figures
are used.
Actual fig. are used.
Subject
Matter
Deals separately with diff. unit
and department.
Overall performance
is judged.
Compulsion Not compulsory compulsory
precision Approximate fig. are taken Actual fig. are taken
reporting Repots are prepared for
internal use only.
For external as well
as internal use.
Bases Managerial Accounting Financial accounting
Quickness Very quick. According to financial year.
Slow and time consuming.
Accountin
g
principles
No set principles are followed Governed by generally
accepted principles and
conventions.

Period No specific period. Prepared for a particular
period.
On a particular date.
Publicatio
n
Not published. Published for the benefit of
the public.

Audit Not possible. Can be got audited.
descriptio
n

Use both monetary and non-
monetary terms.
Use monetary terms only.
Bases Managerial Accounting Cost Accounting
Object to help management in
formulating policies and
plans.

To record then cost.
For cost control, matching of
cost with revenue, decision
making
scope Very wide. Deals with cost ascertainment.
Nature Estimated or projected
figures are used.

Use historical and present fig.
Data used Both qualitative and
quantitative information are
used
Only quantitative aspects are
recorded.
developme
nt
Developed only in the last
thirty years.
Related to industrial
revolution.
Principle
followed
No specific rules and
procedures are followed.
Certain principles and
procedures are followed
Managerial accounting Vs. Cost
accounting
Cost accountancy
The application of costing and cost accounting principles,
methods and techniques to the science, art and practice of
cost control. It include the presentation of information
derived there from for the purpose of decision making.
Cost accounting
Cost accounting is the process of accounting for cost.
Costing
The technique and process of ascertaining costs.

Ascertaining costs
Determining selling price
Measuring and increasing efficiency
Cost control and cost reduction
Ascertaining profits
Providing basis for managerial decision
making
As an aid to management
Advantage to employee
Advantages to the creditors, bankers and
investors.
Advantage to Govt. and the society
Not an independent system of accounts
Based largely on estimation.
Not take into consideration qualitative data.
Costing
Cost accounting
Cost control
Budgeting
Cost audit
By time :-
1) Historical costing
2) Predetermined costs
Estimated costs
Standard costs

By nature :-
1) Material
2) Labour
3) Overhead

By degree of traceability to the product:-
1) Direct
2) Indirect

Association with the period:-
1) Product cost
2) Period cost
Change in the activity or volume:-
1) Fixed cost
2) Variable cost
3) Semi variable cost
By function:-
1) Manufacturing
2) Administrative
3) Selling
4) R & D
5) Pre product

Relationship with accounting period:-
Capital
revenue
Controllability
Controllable
Non-controllable
Cost for analytical and decision making process.
Opportunity cost
Sunk cost
Differential cost
Joint
Common
Imputed
Out of pocket
Marginal
Uniform
Replacement
Others
Conversion, traceable, normal, avoidable, unavoidable,
total cost
Cost centre:- refers to one of the convenient
unit into which the whole factory organization
has been appropriately divided for costing
purposes.
Cost unit:- a unit of product or services in
relation to which costs are ascertained
The chartered institute of management accountants,
London.
Job costing
Process costing
Unit or single or output or single output
costing
Operating costing
Multiple or composite costing
Uniform costing
Departmental costing
The point to be concerned
The objective
Decision making point
Significant operations
Uncontrollable items

Executive side
Accounting side
Technical side & others
Other point to be consider
Accuracy
Equity
Simplicity
Elasticity
Comparability
Promptness
Observance of instruction
Periodical results
Reconciliation with financial accounts.
Lack of support from top management
Resistance from the existing staff
Non-cooperation at other levels of
organization.
Shortage of trained staff
Heavy costs.
The cost of indirect material, indirect labour
and such other exp., including services, as
cannot be conveniently charged direct to
specific cost centers or cost unit.
CIMA, London- expenditure on labour,
materials or services which can not be
economically identified with a specific
saleable cost unit.

Function wise classification:-
Manufacturing or production overheads
Administration overheads
Selling and distribution overheads
Behavior wise classification:-
Fixed overheads
Variable overheads
Semi-overheads
Element wise classification:-
Indirect material
Indirect labor
Indirect expenses
Single overhead rate
Multiple overhead rate
Collection of overheads
Allocation and apportionment of overheads
Apportionment of such overheads which can not
be allocated
Re-appointment of service department exp. To
production department.
The total overheads cost of production
department.
An overhead rate to be computed for each
department.
Departmental overheads are charged to the cost
of products
Periodical comparision.
Primary document used:
Stores requisitions
Job cards or tickets
Invoices or purchase voucher
Salary or pay bill
Cash book
Subsidiary records
Allocation of overheads: that part of cost
attribution which charges a specific cost to a
cost centre or cost unit CIMA

Apportionment of overheads: that part of
cost attribution which shares costs among
two or more cost centers or cost units in
proportion to the estimated benefits received,
using a proxy -CIMA
Allocation of overheads:- there are certain
overheads which can be directly estimated for
different departments. These exp. Are wages
paid to indirect workers, contribution to
provident funds or any social security
schemes , depreciation, normal ideal time
wages etc.
Apportionment of overheads:-
According to the department wages
According to capital values of the assets
According to floor area occupied
According to no. of workers employed
According to production hours of labours
According to technical estimate


































Apportionment of service department
overheads:-
Service or use method
Potential benefits
Ability to pay methods
Direct of specific methods
Refers to charging of the factory overheads of
a no of particular production department to
various products manufactured, or job
completed, or orders executed in that
department. The methods for absorption of
these overheads may be put in to two
categories:
Percentage method
Hourly rate methods

Collection and classification
Departmentalization
:-The office and administration overheads are allocated
and/or apportioned directly and/or indirectly , as the
case may be, to various administrative departments/
administration cost centers.
Absorption
As a percentage to factory cost
As a percentage to factory overheads
As a percentage to sales
As a percentage conversion cost
As a percentage to gross profit
Two categories of selling and distribution
overheads:-
Direct overheads
Indirect overheads
Collection and classification of overheads
Departmentalization of overheads:-
1. Allocation
2. Apportionment
1. Advertisement and sales promotion
2. Credit and collection
3. Financial and general administration
4. Transportation
5. Warehousing and storage costs


Absorption of over head:-
A rate per article
A percentage of sale
A percentage of work cost
A percentage cash collected

Cost sheet is a document which provides for
the assembly of the detailed cost of a cost
centre or cost unit. It is a periodical
statement of cost designed to show in detail
the various elements of costs of goods
produced.
Type of cost sheet
Historical cost sheet
Estimated cost sheets+
It gives total cost and cost per unit for a
particular period
It gives information to management for cost
control
It provides comparative study of actual
current costs with the cost of corresponding
periods.
It act as a guide.

Cost sheet for the period ..
No of unit produced.
Particulars
Total cost
Cost per
unit
Direct material
Direct labor
Direct expenses
Prime cost
Work overheads
Work cost
Administrative overheads
Cost of production
Selling and distribution overheads
Total cost or cost of sale
Cost sheet should have columns for
Treatment of stock
Stock of raw material
Opening stock of raw material
Add: purchase of raw material
Less : closing stock of raw material

Value of raw material consumed
Stocks of Work-In-Progress:
Prime cost
Add: factory overheads
Work in progress(beginning)
Less: work in progress(closing)

Work cost

Stock of finished goods:

Cost of production
Add: opening stock of finished goods
Less: closing stock of finished goods

Cost of goods sold