ACCOUNTING FOR MANAGEMENTJITHIN K THOMAS

BIMS

INTRODUCTION

In all activities (whether business activities or non-business activities)

In all organizations (whether business organizations like a manufacturing entity or trading entity or non-business organizations like schools, colleges, hospitals, libraries, clubs, temples, political parties)

which require money and other economic resources, accounting is required to account for these resources.

• Accounting is often called the language of business. The basic function of any language is to serve as a means of communication. Accounting also serves this function.

MEANING OF ACCOUNTING

Accounting, as an information system is the process of identifying, measuring and communicating the economic information of an organization to its users who need the information for decision making. It identifies transactions and events of a specific entity. A transaction is an exchange in which each participant receives or sacrifices value (e.g. purchase of raw material).

An event (whether internal or external) is a happening of consequence to an entity (e.g. use of raw material for production).

An entity means an economic unit that performs economic activities.

DEFINITION OF ACCOUNTING

American Institute of Certified Public Accountants (AICPA) which defines accounting as “the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the results thereof”.

DEFINITION OF ACCOUNTING

1. Recording2. Classifying3. Summarising4. Deals with financial transactions5. Analysis and Interprets6. Communicates

ACCOUNTING FOR MANAGEMENT

Booking keeping and Accounting

Is Accounting Science or Art

IMPORTANCE OF ACCOUNTING/ PEOPLE INTERESTED IN

1. Owners: 2. Management:3. Creditors:4. Investors:5. Government:6. Employee:7. Consumers: 8. Research Scholars:

ACCOUNTING FOR MANAGEMENT

Accounting and other Disciplines

Role of Account In public Practice In employment

BRANCHES OF ACCOUNTING

Financial Accounting

Management Accounting

OBJECTIVE OF ACCOUNTING

May differ from business to business depending upon their specific requirements

i) To keeping systematic record

ii) To ascertain the results of the operation

iii) To ascertain the financial position of the business

iv) To portray the liquidity position.

v) To protect business properties

vi) To facilitate rational decision – making

vii) To satisfy the requirements of law