m Accounting is the process of identifying ,

measuring and communicating economic

information to permit informed judgments and
decisions by the user of the information.

m It consists of three parts 1)cost accounting 2)

financial accounting 3) management accounting.
m Accounting information specially used to aid
managers in decision making are called
management accounting information.
 lanning

Efficient
Efficient planning
Imp of Mgmt Actg: Directing
and business
Motivating operations

Efficient
control
‡ Optimum
labour
efficiency

controlling

More rofit , More

Savings more Customer
Delight
m rasic objective is to make management more efficient
m Makes use of accounting and statistical methods to
represent the accounting and other information in the most
suitable form.
m Under Mgmt Actg the accounting information is further
analyzed for better understanding and decision making.
m Mgmt Actg helps management in envisaging and
formulating realistic plans.
m Mgmt Actg measures the execution of the plan so as to
know whether or not the desired efficiency has been
achieved.
m Various reports ± budgets, product costing data
m lanning for control m rovision for capital
m Reporting and m Investors relation.
interpreting m Short term financing.
m Evaluating and m ranking.
consulting. m Credits and collection.
m Investment.
m Tax administration.
m Risk management.
m Government reporting.
m rotection of assets.
m Economic appraisal
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Satutory obligation
Record only monitory items
ublished quarterly and yearly
Has a liability
Has historical transactions
Optional
Many non monitory items like
manpower employed, % of shipment
sent on time etc.
Can be daily, weekly or monthly
depending on the need
No external liability
Is future oriented
m Management accounting not only plan formulation but also
Decision Making and to measure how much desired
efficiency has been achieved.

Statistical tools and techniques for effective decision making

m rUDGETING
m ACCOUNTING RATIOS
m FLOW OF FUNDS STATEMENT
m STANDARD COSTING AND VARIANCE ANALYSIS
m rREAK-EVEN ANALYSIS
m STASTISCAL ANALYSIS
m Meaning: rasic assumptions upon which the
basic process of accounting based.
m a] rusiness/ seperate entity concept-
m b] Dual aspect concept or duality concept
m c] Going concern concept
m d] Accounting period concept
m e] Cost concept
m f] Money measurement concept
m g] Matching Concept
° Conventions
Conservatism
Materiality
Consistency
m rusiness is different from the owner
m We pass Journal entry when owner contributes
towards capital.
m When amount / goods withdrawn for personal
use we make an entry in the business
m When Income tax paid by the owner out of
business money we make an entry In the books
of accounts.
m
m Every debit has equal amount of credit
m Asset =Liability
m Liability creates asset
m If asset>Liability= profit
m If Liability> Assets= loss
m rusiness will go for at least for a reasonable
period.
m Depreciation is provided based on this
assumption.
m If this assumption is not made all Fixed assets will
be valued at realized value like current assets.
m Fixing time limit for accounts
m rofit for the period
m It can be one week or two week or 6 months/one
year or 5 years
m rut to find profit we normally consider 12
months period
m Financial year for income tax point of view 1st
April-31st March of the following year
m Calendar year ±January to December
m Divali to Divali
m The cost to the organization (Actual) is recorded in
the books
m Assets are not recorded according to the market
price every year.
m Depreciation is calculated on cost not based on
market price
m Accounting records may not show the real worth
of the business
m Market price may be disclosed with in bracket in
the balance sheet
m Every thing which can be expressed in terms of
Money is recorded in the books
m reautiful women are working /Handsome boys
working in IrM /Efficient engineers worth 5000
crores ±How do you record?.
m Good working environment?
m Highly motivated employees?
m Matching Cost with revenue

m It is used to estimate correct profits

m Accrual/ cash basis of accounting

ü Even cash paid /received if it belongs to accounting

period we consider them as expenditure /income
ü Salary outstanding for the last month?
ü Income from Investments yet to be received?
ü Rent received in advance for next year?
m To be on the safer side
m Expect future losses as current year loss
m not future income is treated as current year
income.
m Stock is valued cost price / market price which
ever is lower
m Making provision for bad debts is based on this
assumptions.
m Material impact on profitability are considered
m Insignificant transactions ignored from recording
m en purchased, pencil purchased?
m Accounting policies and procedures should be
followed consistently
m Method of depreciation should be followed
consistently.
m Stock valuation- cost/market price whichever is
lower is consistently followed
m If not followed it amount to change in the policy of
the company
m Opening entry
m Transaction analysis
m Recording in journal book
m osting in ledger book
m reparation of trial balance
m Adjustment entries
m Closing of nominal account
m reparation of financial statements
m The left hand side of the account book is debit
side and the right hand side is credit.

m All assets have debit balance

m All liabilities will have credit balance
m All revenue/ income / profit items will have credit
balance
m All expenses and losses itms will have debit
balance.
m Temporary account-

m Also called nominal account.

m It relates to all revenue and expense items. Viz. sale
revenue, interest earned, commission received, dividend
received, cost of gods sold, selling and admin. Exp.,
financial exp etc..
m These are closed after the end of the financial year by
transferring the amount to  L account.
m ermanent accounts± these are of two types
namely personal account and real account.

m ersonal account ± these are accounts of

natural persons who deal with the firm in various
capacities. Also these are accounts of legal or
national entities like bank, companies, and
financial institutions etc.
m Real account ± this account pertains to assets
of the firm. roth tangible and intangible.
m Nominal account ± debit all expenses and
losses and credit all revenues. Incomes and gains.

m ersonal account ± Credit the giver and debit

the receiver.

m Real account ± Debit what comes in and credit

what goes out.
 m Journal ± this contains day wise record of the
business transactions.

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m Ledger ± this is a consolidated record of all the

transactions of each account.
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