BBA | B Com Cost Accounting Full Notes One Day Pattern

BBA | B Com Cost Accounting Full Notes One Day Pattern

 

BBA | B Com Cost Accounting Full Notes One Day Pattern :- in this post bba cost accoung: 

In  this  cyberpointsolution tutorial we are going to describe about the B Com Cost Accounting Full Notes . And also we will describe that how can we use | Process Costing | Process Losses. . When ever we want to learn any thing the things become more earlier is somebody/tutorial/study material taught us through Examples. Here we have tried to describe each and every concept of bba cost accoung with examples in the light of cyberpointsolution.com  best  Short tutorial using simple and best possible example. These examples are so simple that even a beginner. This is  the best  tutorial/Study Material  very beneficial for beginners  as well as Professional.

COST ACCOUNTING CONCEPT

BBA | B Com Cost Accounting Full Notes One Day Pattern
BBA | B Com Cost Accounting Full Notes One Day Pattern

Cost is defined as the amount of expenses (actual or notional) incurred on or attributable to specified thing or activity.

“Cost is the measurement in monetary terms of the amount of resources used for the purpose of production of goods or rendering of services” (Institute of Cost and Work Accounts (ICWA) India).

“A cost is the value of economic resources used as a result of producing or doing the things costed.” (W M Harper)

This activity of the cost will reflect in the manufacturing of the product or rendering of the services which will cover expenditures under various heads.

EVOLUTION OF COST ACCOUNTING

For examples: salary, materials, other expenses etc. In the case of service industry, they are interested in the cost of ascertaining the cost of the services it renders. The cost per unit is arrived by  dividing the total expenditure incurred to the total number of production or the service rendered. This method can be used when there is only one product. If the manufacturing company manufactures more than one product, it becomes imperative to split the total cost among the number of products.

COSTING, COST  ACCOUNTING AND COST ACCOUNTANCY

Costing:

Costing is determining the costs of products/services  and also planning and controlling such costs. Costing is defined as, “the techniques and processes of ascertaining costs”  (The Chartered Institute of Management Accountants  (CIMA). Costing means finding of cost by any process or technique. Principles and rules which are determining the costing are as follows:

  1. The cost of manufacturing a
  2. The cost of providing a

Cost Accounting:

Chartered Institute of Management Accountants, London (CIMA) defines Cost Accounting as “the establishment of budgets, standard costs and actual costs of operations, processes, activities or products: and the analysis of variances, profitability or the social use of funds”.

Cost Accounting is a specialized branch of  accounting,  which involves classification, accumulation, assignment, and control of costs. Cost accounting deals with the collection, analysis of relevant cost data for interpretation and presentation for various problems of management.

Cost Accountancy:

CIMA defines Cost Accountancy as “the application of  costing and cost accounting principles, methods and techniques to the science, art and practice of cost  control and the ascertainment of profitability as well as presentation of information for the purpose of managerial decision making”.

Cost Accountancy is a science as it is a knowledge which a cost accountant should possess to carry out his duties and responsibilities.It is an art as it required skills by the cost accountant to apply principles of cost accountancy to various managerial problems like price, expenditures etc. Practice refers to the efforts taken by the Cost Accountant in the field of cost accountancy. Along with the Theoretical knowledge, cost accountant should possess sufficient practical training and exposure to real life costing problems.

BBA | B Com Cost Accounting Full Notes One Day Pattern
BBA | B Com Cost Accounting Full Notes One Day Pattern

OBJECTIVES OF COST ACCOUNTING :

  1. Ascertaining the Cost: It refers to the cost for a specific product or activity with a reasonable degree of accuracy.
  2. Determining the Selling Price: It helps in finalizing the cost of the product after which the profit margin is added by the manufacturer and thus the selling price of the product is Fixed.
  3. Cost Control and Cost Reduction: It helps in improving profitability by controlling and reducing costs. This objective is important for current scenario due to increase in competition in the business world.
  4. Management in Decision Making: Taking Management decision in respect of the price of the product for which the comparison of actual and standard cost is required to analysis the causes of variation and to take corrective decision.
  5. Ascertaining the Profit: It helps in ascertaining the profit of the business by matching the cost with the revenue of that activity. The purpose is to determine the profit or loss of any activity on an objective basis.
  6. To Provide basis of operating policies
  7. To provide information about inefficient and carelessness
  8. To provide information about actual situation of production activity
  9. To inform the principles and procedures to be followed in Costing System
  10. To prepare comparative analysis through data collection
  11. To estimate cost
  12. To disclose and minimize the waste

IMPORTANCE OF COST ACCOUNTING :-

Cost accounting has many importance. Specially, the following parties are benefited from it.

1. Importance to management

Management is highly benefited with the introduction of cost accounting. It helps to ascertain the cost and selling price of the product. Cost data help management to formulate the business policies. The introduction of budgetary control and standard cost would be an aid to analyse cost. It also helps to find out reasons for profit or loss. It provides data to submit tender as well. Thus, cost accounting is an aid to management.

2. Importance to investors

Investors can obtain benefit fro the cost  accounting. Investors want to know the financial conditions and  earning  capacity of the business. An investor must gather information about organization before making investment decision and investor can gather such information from cost accounting.

3. Importance of consumers

The aim of costing is to reduce the cost of production to minimize the profit of business. Reduction in the cost is usually passed on the consumers in the form of lower price.  Consumers  get quality goods at a lower price.

4. Importance to Employees

Cost accounting helps to fix the wages of the workers. Efficient workers are rewarded for their efficiency. It helps to induce incentive wage plan in business.

5. Importance to Government

Cost accounting is one of the prime sources to provide reliable data to internal as well as external parties. It helps government agencies to determine excise duty and income tax. Government formulates tax policy, industrial policy, export and import policy based on the information provided by the cost accounting.

SCOPE OF COST ACCOUNTING

  1. Costing:It is ascertainment of cost of products, processes, jobs services etc.it is the most important function of cost Accounting.
  2. Cost Recording: It is a maintaining record of all the cost (expenses) incurred during the process of the production of the final products services. Such records are kept on the basis of double entry system.
  3. Cost Analysis: All the costs that are recorded are analyzed and categorized separately. Example: Direct and Indirect Costs, Fixed and Variable Costs, etc.
  4. Cost Control: Cost Accounting, compares the actual cost and standard cost, the difference between the two are analyzed and used for cost control purpose.
  5. Cost Report: Cost accounting generates periodical reports  such as weekly, monthly reports that is used by the  management for taking decisions. These reports are used for planning and controlling, performance appraisal and management decision making.
  6. Cost Audit: It is the verification of cost accounts and to check on the progress of cost accounting plan. Its main focus is on the expenditure and efficiency of performance.

METHODS AND TECHNIQUES OF COSTING

 

The methods of costing are referred to the techniques and process employed in the ascertainment of costs. The method of costing to be applied in a concern depends upon the type  and nature of manufacturing activity.

  1. Job Costing:Job costing is also known as Specific Order Costing or Production order Costing or Job lot costing. This method is undertaken where the work is undertaken as per customers specific requirements. A job, big or small comprises of a specific quality of a product or service to be provided as per customers specifications. This method is used in printing repair shops, interior decorations, painting etc.
  2. Contract Costing: Contract Costing is a variation of job costing and principles of job costing is applied to this method. The cost unit here is a contract which is of a long duration and may continue over more than one year. It is used in construction of roads, dams, ships, buildings etc.
  3. Batch Costing: The cost of a batch of identical products is ascertained and each batch of products is a cost unit for which costs are ascertained. This method is used in production  of cars, toys, ready made garments, shoes etc.
  4. Process Costing: Process Costing is used in mass production and in continuous processes of manufacturing, Costs are accumulated for each process or department. To arrive at a cost per unit, the total cost of a process is divided by the number of units produced. The finished product of one process is transferred to the next process until the final product is manufactured. Examples: chemical works, sugar mills, soap manufacturing, textile mills etc.
  5. Operating Cost: In this method a refinement and a more detailed application of process is involve in costing. A process consists of number of operations. This process analysis minute costs and ensure greater accuracy and better control.

Techniques of Costing

BBA | B Com Cost Accounting Full Notes One Day Pattern
BBA | B Com Cost Accounting Full Notes One Day Pattern

Along with different methods of costing the following techniques are used to ascertain cost:

    1. Historical Costing: The actual costs are ascertained only after they have been incurred. This is a conventional method of cost ascertainment.
    2. Absorption Costing:It is a traditional method where both the fixed and variable methods are charged to product. This is in complete contrast to marginal costing where only variable costs are charged to products. Until recently this was the only technique used by cost accountants, now a days it has many restrictions.
    3. Marginal Costing: Marginal Cost separates fixed cost and variable cost. It regards only variable cost as the cost of products and fixed cost is treated as period cost. This technique helps and guides management in taking various policy decision under different conditions of business such as decision  regarding the pricing of the product, suspension or continuance of a particular product
    4. Standard Costing: The ascertainment and use of standard  cists ad measurement and analysis of variances. Standard cost is pre-determined as target of performance and actual performance is measured against
    5. Uniform Costing: The use of the same costing principles, methods and/or practices by several undertakings with a view to achieve uniformity in approach and

ROLE OF COST ACCOUNTANT IN DECISION MAKING

Cost Accountant plays  an important role in an organization.  It is really imperative that organizations pays attention on the job of cost analysist. Cost Accountancy deals in the preparation of various reports for the information of internal management for the smooth running of the business. All the important decision taken by the management for the future of the company’s progress is prepared  by the cost accountants.

 

Cost Accountants perform following duties:
  1. To analyse material, labour and overhead expense.
  2. To reconcile daily productions with accounting transactions.
  3. To co-ordinate with research and development department for the new products.
  4. To assist the controller in developing the cost improvement opportunities.
  5. To prepare new product costing as well as to do gross profit analysis for the marketing in order to determine the feasibility before presenting the samples and pricing to the final consumers.

MANAGEMENT ACCOUNTING, MEANING, OBJECTIVES, NATURE AND SCOPE

INTRODUCTION:

Management accounting is the study of managerial aspect of financial accounting, “accounting in relation to management function”. It shows how the accounting function can be re-oriented so as to fit it within the framework of management activity. The primary task of management accounting is, therefore, to redesign the entire accounting system so that it may serve the operational needs of the firm. If furnishes definite accounting information, past, present or future, which may be used as a basis for management action. The financial data are so devised and systematically development that they become a unique tool for management decision.

Definition:

The Institute of Chartered Accountants of England states “Any form of accounting which enables a business to be conducted more efficiently can be regarded as management accounting”.

“Management Accounting may be defined as the application of accounting techniques to the provisions of information designed  to assist all levels of management in planning and controlling the activities of the firm”.

The Institute of Cost and Works Accountants of India defines Management Accounting as “a system of collection  and presentation of relevant economic information relating to an enterprise for planning, controlling and decision-making”.

Objectives of Management Accounting

Main functions of Management Accounting are as follows:

  1. Planning – Information and date provided by management accounting helps management to forecast and prepare short- term and long term plans for the future activities of the business and formulate corporate strategy. For this purpose management accounting techniques like budgeting, standard  costing, marginal cost.

 

  1. Coordinating: Management accounting techniques of planning also help in coordinating various business activities. For example, while preparing budgets for various departments like production, sales, purchases, etc., there should be full coordination so that there is no contradiction. By proper financial reporting, management accounting helps in achieving coordination in various business activities  and  accomplishing the set goals. etc

 

  1. Controlling: Controlling is a very important function of management and management accounting helps in controlling performance by control techniques such as standard costing, budgetary control, control rations, internal audit, Business.

 

  1. Communication: Management accounting system prepares reports for presentation to various levels of management which show the performance of various sections of the business. Such communication in the form of reports to various levels of management helps to exercise effective control on various business activates and successfully running the

 

  1. Financial analysis and interpretation: In order to make accounting data easily understandable, the management accounting offers various techniques of analyzing, interpreting and presenting this data in non-accounting language so that every one in organization understands it. Ratio analysis, cash flow and funds flow statements trend analysis, etc., are some of the management accounting techniques which may be used for financial analysis and interpretation.

 

  1. Qualitative Information: Apart from monetary and quantitative data, management accounting provides qualitative information which helps in taking better decisions. Quality of goods, customers and employees, legal judgments, opinion polls, logic, et, are some of the expels of qualitative information supplied  and used by the management accounting system for better management.

 

  1. Tax Policies: Management accounting system is  responsible for tax policies and procedures and supervises and coordinates the reports prepared by various authorities.

 

  1. Decision – Making: Correct decision making is crucial to the success of a business. Management accounting has certain special techniques which help management in short team and long term decisions. For example, techniques like marginal costing, differential costing, discounted cash flow, et., help in decisions such as pricing of products, make or buy, discontinuance of a product line, capital expenditure, etc

Nature of Management Accounting

The task of management accounting involves furnishing of accounting data to the management for basing its decisions on it. It also helps, in improving efficiency and achieving organizational goals. The following are the main characteristics of management accounting:

  1. Providing Accounting Information: Management according is based on accounting information. The collection and classification of data is the primary function of accounting department. The information so collected is used by the management for taking policy decisions. Management accounting involves the presentation of information in away it suits managerial needs. The accounting data is used for reviewing various policy decisions. Management accounting is a service function and it provides necessary information to different levels of Management.
  2. Cause and effect analysis: Financial accounting is limited to the preparation of profit and loss account and finding out the ultimate result, i.e., profit or loss management accounting goes   a step further. The ‘cause and effect’ relationship is discussed in management accounting. If there is a loss, the reasons for the loss are probed. If there is a profit, the factors different expenditures, current assets, interest payables, share capital, etc. So the study of cause and effect relationship is possible in management accounting.
  3. Use of Special Techniques and concepts: management accounting uses special techniques and concepts to make accounting data more useful. The techniques usually used include financial planning and analysis, standard costing, budgetary control, marginal costing, project appraisal, control accounting, etc. The type of technique to be used will be determined according to the situation and necessity.
  4. Taking Important Decisions: Management accounting helps in taking various important decisions. It supplies necessary information to the management which may base its decisions on it. The historical data is studied to see its possible impact on future decisions. The implications of various alternative decisions are also taken into account while taking important decisions.
  5. Achieving of Objectives: In management accounting, the accounting information is used in such a way that it helps in achieving organizational objectives. Historical data is used for formulating plans and setting up objectives. The recording of actual performance and comparing it with targeted figures will give an idea to the management about the performance of various departments. In case there are deviations between the standards set and actual performance of various departments corrective measures can be take at one. All this is possible with the help of budgetary control and standard costing.
  1. 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. The performance appraisal will enable the management to pin point efficient and inefficient spots. An effort is made to take corrective measures so that efficiency is improved. The constant review of working will make the staff  cost – conscious. Every one will try to control cost on one’s own part.
  2. Supplies Information and not decision: The management accountant supplies information to the management. The decisions are to be taken by the top management. The information is classified in the manner in which it is required by the management. management accountant is only to guide and not to supply decisions. ‘How is the data to be utilized’ will depend upon the caliber and efficiency of the
  3. 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.

Scope of Management of Accounting

  1. Financial Accounting: Financial Accounting deals with the historical data. The recorded facts about an organization are useful for planning the future course of action. Though planning is always for the future but still it has to be based on past and present data. The control aspect too is based on financial data. The performance appraisal is based on recorded facts and figures. So management accounting is closely related to financial accounting.
  2. Cost Accounting: Cost Accounting provides various  techniques for determining cost of manufacturing products or cost of providing service. It uses financial data for finding out  cost of various jobs, products or processes. The systems of standard costing, marginal costing, differential costing and opportunity costing are all helpful to the management for planning various business activities.
  3. Financial Management: Financial Management is concerned with the planning and controlling of the financial resources of the firm. It deals with raising of funds and their effective utilizationso to maximize earnings. Finance has become so important for every business that all managerial activities are connected with it. Financial viability of various propositions influence decisions on them. Therefore management accounting includes and extends to the operation of financial management also.
  4. Budgeting and Forecasting: Budgeting means expressing the plans, policies and goals of the enterprise for a definite period in future. The targets are set for different departments and responsibility is fixed for achieving these targets. The comparison of actual performance with budgeted figures will  give an idea to the management about the performance of different departments. Forecasting, on the other hand, is a prediction of what will happen as a result of a given set of circumstances. Both budgeting and forecasting are useful for management accountant in planning various activities.
  5. Inventory Control: Inventory is used to denote stock of raw materials, goods in the process of manufacture and finished products. Inventory has a special significance in accounting for determining correct income for a given period. Inventory control is significant as it involves large sums. The management should determine different levels of stocks, is. minimum  level, maximum level, re- ordering level for inventory control. The control of inventory will help in controlling costs of products. Management accountant will guide management as  to  when and from where to purchase and how much to purchase. So the study of inventory control will be helpful for taking managerial decisions.
  6. Reporting to Management: One of the functions of management accountant is to keep the management  informed of various activities of the concern so as to assist it in controlling the enterprise. The reports are presented in the form of graphs, diagrams, index numbers or other statistical techniques so as to make them easily understandable.  The  management accountant sends interim reports to the management and these reports may be monthly, quarterly, half – yearly.  The reports  may cover profit and loss statement, cash and found flow statements, stock reports, absentee reports and reports on orders in hand, etc. These reports are helpful in giving a  constant review of working of the business.
  7. Interpretation of Data: The management accountant interprets various financial statements to the management. These statements give an idea about the financial and earning position of the concern. These statements may be studied in comparison to statements of earlier periods or in comparison with the statements of similar other concerns. The significance of these report is explained to the management in a simple language. If the statements are not properly interpreted then wrong conclusions may be drawn.  So interpretation is also important  as compiling of financial statements.
  8. Control procedures and Method: Control procedures and methods are needed to use various factors of production in a most economical way. The studies about cost, relationship of cost and profits are useful for using economic resources efficiently and economically.
  9. Internal Audit: Internal audit system is necessary to judge the performance of every department. The actual performance of every department and individual is compared with the pre- determined standards. Management is able to know deviations in performance. Internal audit helps management in fixing responsibility of different individuals.
  10. Tax Accounting: In the present complex tax systems, tax planning is an important part of management accounting. Income statements are prepared and tax liabilities  are calculated. The management is informed about the tax burden from central government, state government and  local  Various tax returns are to be filed with different departments and tax payments are to be made in time. Tax accounting comes under the purview of management accountant’s duties.
  11. Office services: Management accountant may be required to control an office. He will be expected to deal with data processing, filing, copying, duplicating, communicating etc. He will also be reporting about the utility of different  office machines.

TOOLS AND TECHNIQUES OF MANAGEMENT

 

  1. Financial Planning:Financial planning is the act of deciding in advance about the financial activities necessary for the concern to achieve its primary objectives. It includes determining both long term and short term financial objectives of the enterprise, formulating financial policies and developing the financial procedure to achieve the objectives. The role of financial policies cannot be emphasized to achieve the maximum return on the capital employed. Financial policies may relate to the determination of the amount of capital required, sources of funds, govern the determination and  distribution of income, act as a guide in the use of debt and equity capital and determination of the optimum level of investment in various assets.
  2. Analysis of Financial Statements:The analysis is an attempt  to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for future earnings, ability to pay interest and debt  maturities  and profitability of a sound dividend The techniques of such analysis are comparative financial statements, trend analysis, cash funds flow statements and ratio analysis. This analysis results in the presentation of information which will help the business executives, investors and creditors.
  3. Historical Cost Accounting:The historical cost accounting provides past data to the management relating to the cost of each job, process and department so that comparison may be made with the standard costs. Such comparison may be helpful to the management for cost control and for future
  4. Standard Costing:Standard costing is the establishment of standard costs under most efficient operating conditions, comparison of actual with the standard, calculation and analysis of variance, in order to know the reasons and to pinpoint the responsibility and to take remedial action so that adverse things may not happen again. This aspect is necessary to have cost control.
  5. Budgetary Control:The management accountant uses the tool of budgetary control for planning and control of the various activities of the business. Budgetary control is an important technique of directing business operations in a desired direction, i.e., achieves a satisfactory return on investment.
  6. Marginal Costing:The management accountant uses the technique of marginal costing, differential costing and break even analysis for cost control, decision-making and profit maximisation.
  7. Funds Flow Statement:The management accountant uses the technique of funds flow statement in order to analyse the changes in the financial position of a business enterprise between two dates. It tells wherefrom the funds are coming in the business and how these are being used in the business. It helps a lot in financial analysis and control, future guidance and comparative studies.
  8. Cash Flow Statement:A funds flow statement based on increase or decrease in working capital is very useful in long- range financial planning. It is quite possible that there may be sufficient working capital as revealed by the funds flow statement and still the company may be unable to meet its current liabilities as and when they fall due. It may be due to an accumulation of inventories and an increase in trade debtors.In such a situation, a cash flow statement is more useful because   it gives detailed information of cash inflows and outflows. Cash flow statement is an important tool of cash control because it summarises sources of cash inflows and uses of cash outflows  of a firm during a particular period of time, say a month or a  year. It is very useful tool for liquidity analysis of the enterprise.
  9. Decision Making:Whenever there are different alternatives of doing a particular work, it becomes necessary to select the best out of all alternatives. This requires decision on the part of the management. The management accounting helps the management through the techniques of marginal costing, capital budgeting, differential costing to select the best  alternative which will maximise the profits of the business.
  10. Revaluation Accounting:The management accountant, through this technique assures the maintenance and preservation of the capital of the enterprise. It brings into  account the impact of changes in the prices on the preparation  of the financial statements.
  11. Statistical and Graphical Techniques:The management accountant uses various statistical and graphical techniques in order to make the information more meaningful  and presentation of the same in such form so that it may help the management in decision-making. The techniques used are Master Chart, Chart of Sales: and Earnings, Investment Chart, Linear Programming, Statistical Quality Control, etc.
  12. Communicating:The success or failure of the management is dependent on the fact, whether requisite information is provided to the management in right form at the right time so as to enable them to carry out the functions of planning, controlling and decision-making effectively. The management accountant will prepare the necessary reports for providing information to the different levels of management by proper selection of data to be presented, organisation of data and selecting the appropriate method of reporting.

Relationship between  Financial Accounting and Management Accounting 

Financial accounting and management accounting are two major sub-systems of accounting information system. Both are concerned with revenues and expenses, assets and liabilities and cash flows. Both therefore involve financial statements. But the major differences between the two arise because they serve different audiences. The main points of difference between the two are as follows:

Financial Accounting Management Accounting
Financial                                accounting information is mainly intended for external users like investors, shareholder, creditors, Govt. authorities etc. Management                              accounting information is mainly meant for internal user, i.e., management
Under company law and tax law, financial accounting is obligatory to satisfy various statutory provisions. Management accounting is optional though its utility makes it highly desirable to adopt it.
Financial accounting shows the profit / loss of the business as a whole. It does not show  the cost and profit for individual products, processes or departments, etc. Management                              accounting provides detailed information about individual products, plants, departments or any other responsibility centre.
It is concerned with recording transactions, which have already taken place, i.e., it represents past or historical records. It is future oriented and concentrates on what is likely to happen in future though it may use past data for future projections.
Financial reports, i.e., Profit and Loss account and Balance Sheet are prepared  usually on a year to year basis. Management accounting reports are prepared frequently, i.e,  these may be monthly, weekly or even daily depending on managerial requirements
Companies are required to prepare financial accounts according to accounting standards issued by the Institute of chartered accountants of India. Management accounting is not bound by accountings standards. It may use any practice which generates useful information to management.
Financial accounting prepares general purpose statements Profit & Loss account and Balance sheet which are used by external users. In Management accounting special purpose reports are prepared, eg,,  performance report of sales manager or any other department manager which are used by top level Management.
Financial statements, i.e., P&L A/c and Balance sheet are published for general public use and also sent to share holders. These are required to be audited by the chartered Accountants. Management accounting statements are for internal use and thus neither published for general public use nor these are required to be audited by chartered accountants.
Financial accounting provides information in terms of money only. Management accounting may apply monetary or non monetary units of measurements for example information may be expressed in terms of Rs. or units of quantity, machine hours,  labour hours, etc.

The Management Accountant

Management accounting provides significant economic and financial data to the Management and the Management Accountant is the channel through which this information efficiently and effectively flows to the Management.

The Management Accountant has a very significant role to perform in the installation, development and functioning of an efficient and effective management accounting system. He designs the frame work of the financial and cost control reports that provide each managerial level with the most useful data at the most appropriate time. He educates executives in the need from control information and ways of using it. His position is unique with respect to information about the organization. Apart from top management no one in the organization perhaps knows more about the various functions of the organization than him. He is as  the  chief intelligence officer or financial advisor or financial controller of the management. He gathers information, breaks it down, sifts it out  and organizes it into meaningful categories. He separates relevant and irrelevant information and then ranks relevant information according to degree of importance to management. He reports relevant information in an intelligible form to the management and sometimes also to those who are interested in the information outside the company. He also compares the actual  performance with the planned one and reports and interprets the results of operations to all levels of management and to the owners of the business.

Functions of the Management Accountant

It is the duty of the management accountant to keep all levels of management informed of their real position. He has, therefore, varied functions to perform. His important functions can be summarized as follows:

  1. Planning: He has to establish, coordinate and administer as an integral part of management, an adequate plan for the control of the operations. Such a plan would include profit planning, programmers of capital investment and financing sales forecasts, expense budgets and cost standards.
  2. Controlling: he has to compare actual performance with operating plans and standards and to report and interpret the results of operations to all levels of management and the  owners of the business. This is done through the compilation of appropriate accounting and statistical records and reports.
  3. Coordinating: He consults all segments of management responsible for policy or action. Such consultation  might concern any phases of the operation of the business having to  do with attainment of objectives and the effectiveness of the organization structures and policies.
  4. Other Functions:
    1. He administers tax policies and
    2. He supervises and coordinates the preparation of reports to government
    3. He ensures fiscal protection for the assets of the business through adequate internal control and proper insurance coverage.
    4. He carries out continuous appraisal of economic and social forces, and the government influences, and influences, and interprets their effect on the

Short question for exam Important question  

      • Nature of Cost Accounting
      • Scope of Cost Accounting
      • Objectives of Cost Accounting
      • Define Management Accounting
      • List few functions of Management accounting
      • State two differences between Management accounting & financial accounting
      • State two differences between Management accounting and cost accounting
      • What are the duties of a management accountant?
      • Name any 5 techniques of management accounting.
      • State any 3 objectives of management accounting.

Long Question for Exam Important Question 

 

  • Explain the meaning, nature and scope of Cost Accounting.
  • Explain the various ways of classification of cost.
  • Define management accounting & explain its Objective.
  • Discuss in detail the nature & scope of management accounting.
  • Management accounting is nothing more than the use of financial information for management purposes. Explain this statement & clearly distinguish between management  accounting and financial accounting.
  • Who is a management accountant? Explain his role & functions in an organisation. enterprises their effect on the business.

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