managerial accounting (2)
TRANSCRIPT
-
8/12/2019 Managerial Accounting (2)
1/40
-
8/12/2019 Managerial Accounting (2)
2/40
Such of its technique and procedures bywhich accounting mainly seeks to aid themanagement collectively have come to beknown as management accounting
The inst. Of chartered accountants of India Management accounting is the presentation
of accounting information in such a way as toassist management in the creation of policyand the day-to day operation of anundertaking
Anglo-American Council on productivity
-
8/12/2019 Managerial Accounting (2)
3/40
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
-
8/12/2019 Managerial Accounting (2)
4/40
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
-
8/12/2019 Managerial Accounting (2)
5/40
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
-
8/12/2019 Managerial Accounting (2)
6/40
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
-
8/12/2019 Managerial Accounting (2)
7/40
Management Accounting vs. FinancialAccountingBases Managerial ccounting Financial accounting
Object to help management informulating policies andplans.
To know the financialposition.
Nature Estimated or projected figuresare used.
Actual fig. are used.
SubjectMatter
Deals separately with diff. unitand department.
Overall performanceis judged.
Compulsion Not compulsory compulsory
precision Approximate fig. are taken Actual fig. are taken
reporting Repots are prepared forinternal use only.
For external as wellas internal use.
-
8/12/2019 Managerial Accounting (2)
8/40
Bases Managerial ccounting Financial accountingQuickness Very quick. According to financial year.
Slow and time consuming.
Accountingprinciples
No set principles are followed Governed by generallyaccepted principles andconventions.
Period No specific period. Prepared for a particularperiod.On a particular date.
Publication
Not published. Published for the benefit ofthe public.
Audit Not possible. Can be got audited.
descriptio
n
Use both monetary and non-
monetary terms.
Use monetary terms only.
-
8/12/2019 Managerial Accounting (2)
9/40
Bases Managerial ccounting Cost ccountingObject to help management in
formulating policies andplans.
To record then cost.
For cost control, matching ofcost with revenue, decisionmaking
scope Very wide. Deals with cost ascertainment.
Nature Estimated or projectedfigures are used.
Use historical and present fig.
Data used Both qualitative andquantitative information areused
Only quantitative aspects arerecorded.
development
Developed only in the lastthirty years.
Related to industrialrevolution.
Principle
followed
No specific rules and
procedures are followed.
Certain principles and
procedures are followed
Managerial accounting Vs. Costaccounting
-
8/12/2019 Managerial Accounting (2)
10/40
Cost accountancy The application of costing and cost accounting principles,
methods and techniques to the science, art and practice ofcost control. It include the presentation of informationderived 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.
-
8/12/2019 Managerial Accounting (2)
11/40
Ascertaining costs Determining selling price
Measuring and increasing efficiency
Cost control and cost reduction Ascertaining profits
Providing basis for managerial decisionmaking
-
8/12/2019 Managerial Accounting (2)
12/40
As an aid to management Advantage to employee
Advantages to the creditors, bankers andinvestors.
Advantage to Govt. and the society
-
8/12/2019 Managerial Accounting (2)
13/40
Not an independent system of accounts Based largely on estimation.
Not take into consideration qualitative data.
-
8/12/2019 Managerial Accounting (2)
14/40
Costing Cost accounting
Cost control
Budgeting Cost audit
-
8/12/2019 Managerial Accounting (2)
15/40
By time :-1) Historical costing2) Predetermined costs
Estimated costs Standard costs
By nature :-1) Material2) Labour3) Overhead
By degree of traceability to the product:-1) Direct2) Indirect
-
8/12/2019 Managerial Accounting (2)
16/40
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
-
8/12/2019 Managerial Accounting (2)
17/40
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
-
8/12/2019 Managerial Accounting (2)
18/40
Cost centre:- refers to one of the convenientunit into which the whole factory organizationhas been appropriately divided for costingpurposes.
Cost unit:- a unit of product or services inrelation to which costs are ascertained
The chartered institute of management accountants,London.
-
8/12/2019 Managerial Accounting (2)
19/40
Job costing Process costing
Unit or single or output or single outputcosting
Operating costing
Multiple or composite costing
Uniform costing
Departmental costing
-
8/12/2019 Managerial Accounting (2)
20/40
The point to be concerned The objective
Decision making point
Significant operations
Uncontrollable items
-
8/12/2019 Managerial Accounting (2)
21/40
Executive side Accounting side Technical side & othersOther point to be consider Accuracy Equity Simplicity Elasticity Comparability Promptness Observance of instruction Periodical results Reconciliation with financial accounts.
-
8/12/2019 Managerial Accounting (2)
22/40
Lack of support from top management Resistance from the existing staff
Non-cooperation at other levels oforganization.
Shortage of trained staff
Heavy costs.
-
8/12/2019 Managerial Accounting (2)
23/40
The cost of indirect material, indirect labourand such other exp., including services, ascannot be conveniently charged direct tospecific cost centers or cost unit.
CIMA, London- expenditure on labour,materials or services which can not beeconomically identified with a specificsaleable cost unit.
-
8/12/2019 Managerial Accounting (2)
24/40
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
-
8/12/2019 Managerial Accounting (2)
25/40
Single overhead rate Multiple overhead rate
-
8/12/2019 Managerial Accounting (2)
26/40
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.
-
8/12/2019 Managerial Accounting (2)
27/40
Primary document used: Stores requisitions
Job cards or tickets
Invoices or purchase voucher
Salary or pay bill Cash book
Subsidiary records
-
8/12/2019 Managerial Accounting (2)
28/40
Allocation of overheads: that part of costattribution which charges a specific cost to acost centre or cost unit CIMA
Apportionment of overheads: that part ofcost attribution which shares costs amongtwo or more cost centers or cost units in
proportion to the estimated benefits received,using a proxy -CIMA
-
8/12/2019 Managerial Accounting (2)
29/40
Allocation of overheads:- there are certain
overheads which can be directly estimated fordifferent departments. These exp. Are wagespaid to indirect workers, contribution toprovident funds or any social security
schemes , depreciation, normal ideal timewages 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
-
8/12/2019 Managerial Accounting (2)
30/40
Apportionment of service departmentoverheads:- Service or use method
Potential benefits
Ability to pay methods Direct of specific methods
-
8/12/2019 Managerial Accounting (2)
31/40
Refers to charging of the factory overheads ofa no of particular production department tovarious products manufactured, or jobcompleted, or orders executed in that
department. The methods for absorption ofthese overheads may be put in to twocategories: Percentage method
Hourly rate methods
-
8/12/2019 Managerial Accounting (2)
32/40
Collection and classification Departmentalization
:-The office and administration overheads are allocatedand/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
-
8/12/2019 Managerial Accounting (2)
33/40
Two categories of selling and distributionoverheads:-
Direct overheads
Indirect overheads
Collection and classification of overheads Departmentalization of overheads:-1. Allocation2. Apportionment
1. Advertisement and sales promotion
2. Credit and collection3. Financial and general administration
4. Transportation
5. Warehousing and storage costs
-
8/12/2019 Managerial Accounting (2)
34/40
Absorption of over head:- A rate per article
A percentage of sale
A percentage of work cost
A percentage cash collected
-
8/12/2019 Managerial Accounting (2)
35/40
Cost sheet is a document which provides forthe assembly of the detailed cost of a costcentre or cost unit. It is a periodicalstatement of cost designed to show in detail
the various elements of costs of goodsproduced.
Type of cost sheet Historical cost sheet
Estimated cost sheets+
-
8/12/2019 Managerial Accounting (2)
36/40
It gives total cost and cost per unit for aparticular period
It gives information to management for costcontrol
It provides comparative study of actualcurrent costs with the cost of correspondingperiods.
It act as a guide.
Cost sheet for the period ..
-
8/12/2019 Managerial Accounting (2)
37/40
No of unit produced.
Particulars Total costCost per
unit
Direct materialDirect labor
Direct expenses
Prime cost
Work overheads
Work cost
Administrative overheads
Cost of production
Selling and distribution overheads
Total cost or cost of sale
C t h t h ld h l f
-
8/12/2019 Managerial Accounting (2)
38/40
Cost sheet should have columns for
Treatment of stock Stock of raw material
Opening stock of raw materialAdd: 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
-
8/12/2019 Managerial Accounting (2)
39/40
Stock of finished goods:
Cost of production
Add: opening stock of finished goods
Less: closing stock of finished goods
Cost of goods sold
-
8/12/2019 Managerial Accounting (2)
40/40