*Define Management Accounting.
*Management Accounting is helpful in
The process of preparing management
reports and accounts that provide accurate
and timely financial and statistical
information required by managers to
make day to day and short time decisions
is called Management Accounting.
Unlike financial accounting, which
produces annual reports mainly for
external stakeholders, management
accounting generates monthly or weekly
reports for an organization's internal
audiences such as department managers
and the chief executive officer. These
reports typically show the amount of
available cash, sales revenue generated,
amount of orders in hand, state of
accounts payable and accounts receivable,
outstanding debts, raw material and
inventory, and may also include trend
charts, variance analysis, and other
statistics.
*Explain the role of Management
Accounting in Planning and control in
a bank.
A basic objective of managerial
accounting is to improve the effectiveness
of both the management planning and
control functions. Plans should be
developed on the same information base
as the mechanisms of control. Planning
depends on the same reporting and control
mechanisms that make central oversight
possible and decentralized management
feasible. Building the mechanism of
control on one data base (financial
accounting) and the planning process on
another (program analysis) places too
great a burden on the management system
as the intermediary. Managerial
accounting involves in the formulation of
financial estimates of future performance
(the planning and budgeting processes)
and, subsequently, the analysis of actual
performance in relation to those estimates
(program evaluation and control).
*Explain the role of Management
Accounting in a bank.
OR
*Management Accounting is beneficial
for banking operation - comments with
the example.
1. Collection, Classification, Analysis and
Presentation of Financial data
2. Systematic and reliable planning
3. Ascertainment, Reduction and Control
of cost 4. Product Pricing
5. Measurement of work performance
6. Preparation of statement of cost and
other necessary statement
7. Preparation of Master Plan of
Development of Industry
8. Role of Financial Management in
Industry 9. Forward looking
10. Efficiency Analysis
11. Helping in decision making
*Describe the necessity of Financial
decision making-discuss the statement.
Managerial accounting information provides
data-driven input to these decisions, which can
improve decision making over the long term.
Small business managers can leverage this
powerful tool to help make their business more
successful by understanding how management
accounting benefits common business decision
contexts.
Relevant Cost Analysis
Managerial accounting information is used by
company management to determine what
should be sold and how to sell it. For example,
a small business owner may be unsure where
he should focus his marketing efforts.
Activity-based Costing Techniques
Once the company has determined what
products to sell, the business needs to
determine to whom they should sell the
products. By using activity-based costing
techniques, small business management can
determine the activities required to produce and
service a product line.
Make or Buy Analysis
A primary use of managerial accounting
information is to provide information used in
manufacturing. By completing a make or buy
analysis, she can determine which choice is
more profitable.
Utilizing the Data
Managerial accounting information provides a
data-driven look at how to grow a small
business. Budgeting, financial statement
projections and balanced scorecards are just a
few examples of how managerial accounting
information is used to provide information to
help management guide the future of a
company.
*Shortcomings of traditional methods of
credit analysis.
1. Past financial performance, good or bad, is
not necessarily an accurate predictor of future
performance.
2. Financial statements do not tell you about
changes in senior management.
3. Financial statements do not tell you about the
loss of major customers.
4. Financial statements do not tell you about the
competitive environment in which the company
operates.
5. Financial statements do not disclose the
companys future prospects, or the results of its
expenditures on Research and Development.
6. The more out-of-date a customer financial
statements are, the less reliable they are as a
risk management tool.
Statement Analysis.
1. Holding Of Share: Shareholders are the
owners of the company. The financial
statement analysis is important as it provides
meaningful information to the shareholders in
taking decisions.
2. Decisions And Plans: The management of
the company is responsible for taking
decisions and formulating plans and policies
for the future. They, therefore, always need to
evaluate its performance and effectiveness of
their action to realise the company's goal in
the past. For that purpose, financial statement
analysis is important to the company's
management.
3. Extension Of Credit: The creditors are the
providers of loan capital to the company.
Therefore they may have to take decisions as
to whether they have to extend their loans to
the company and demand for higher interest
rates. The financial statement analysis
provides important information to them for
their purpose.
4. Investment Decision: The prospective
investors are those who have surplus capital
to invest in some profitable opportunities.
Therefore, they often have to decide whether
to invest their capital in the company's share.
The financial statement analysis is important
to them because they can obtain useful
information for their investment decision
making purpose.
*Describe the Limitations of Financial
Statement Analysis.
Although financial statement analysis is
highly useful tools, it has limitations also.
The limitations involve the comparability of
financial data between companies and the
need to look beyond ratios.
Comparison of one company with another
can provide valuable clues about the financial
health of an organization.
The analyst should keep in mind the lack of
comparability of the data before drawing any
definite conclusion. Comparisons of key
ratios with other companies and with industry
average often suggest avenues for further
investigation.
*Describe briefly the uses of Financial
Statement Analysis.
Analysis of the statement of financial position
referred to as a balance sheet analysis, reports
on a companys assets, liabilities, and
ownership equity at a given point in time.
1. A financial statement analysis provides
information on the operation of the enterprise.
These include sale and the various expenses
incurred during the processing state.
2. Financial statement analysis gives
information about the changes in equity
which helps to explain the changes of the
companys equity throughout the reporting
 period.
3. Financial statement analysis provides
information about cash flows which helps to
prepare report on companys cash flow
activities, particularly it operating, investing
and financial activities.

*Compare and Contrast between

Management Accounting and
Financial Accounting.

The differences between management

accounting and financial accounting
include:
1. Management accounting provides
information to people within an
organization while financial
accounting is mainly for those outside
it, such as shareholders.
2. Financial accounting is required by
law while management accounting is
not. Specific standards and formats
may be required for statutory
accounts such as in the I.A.S
International Accounting Standard
within Europe.
3. Financial accounting covers the
entire organization while
management accounting may be
concerned with particular products or
cost centers.
Contrast
Format:
Fin. Acc: Financial accounts are
supposed to be in accordance with a
specific format by IAS so that
financial accounts of different
organizations can be easily compared.
Man. Acc: No specific format is
designed for management accounting
systems.
Planning and control:
Fin. Acc: Financial accounting helps
in making investment decision, in
credit rating.
Man. Acc: Management Accounting
helps management to record, plan and
control activities to aid decision-
making process.
Focus:
Fin. Acc: Financial accounting
focuses on history.
Man. Acc: Management accounting
focuses on future.
Users:
Fin. Acc: Financial accounting
reports are primarily used by external
users, such as shareholders, bank and
creditors.
Man. Acc: Management accounting
reports are exclusively used by
internal users viz. managers and
employees.
External Vs. Internal:
Fin. Acc: A financial accounting
system produces information that is
used by parties external to the
organization, such as shareholders,
bank and creditors.
Man. Acc: A management accounting
system produces information that is
used within an organization, by
managers and employees.