MOHAMMAD BADRUL ALAM

SENIOR OFFICER
AGRANI BANK LTD
RAJBARI BR., RAJBARI
CELL NO-01725308970
FACEBOOK-MB ALAM ARIF

1.Define Management accounting

2.Objectives of Management Accounting
3.*Compare and Contrast between Management Accounting and Financial Accounting
4.*Explain the role of Management Accounting in Planning and control in a bank
5.*Management Accounting is beneficial for banking operation - comments with the
example
6.*Management Accounting is helpful in decision making-discuss the statement
7.*Shortcomings of traditional methods of credit analysis.
8.*Describe the necessity of Financial Statement Analysis.
9.*Describe the Limitations of Financial Statement Analysis
10.*Describe briefly the uses of Financial Statement Analysis

1.Define Management accounting

Management accounting is concerned with the provisions and use of accounting information
to ma na ge rs within organizations, to provide them with the basis in making informed
business decisions that would allow them to be better equipped in their management and
control functions.
According to the Chartered Institute of Management Accountants (CIMA) that
Management Accounting is the process of identification, measurement, accumulation,
analysis, preparation, interpretation and communication of information used by management
to plan, evaluate and control within an entity and to assure appropriate use of and
accountability for its resources.
The American Institute of Certified Public Accountants (AICPA) states that
management accounting practice extends to the following three areas:
• Strategic Management— advancing the role of the management accountant as a
strategic partner in the organization.
• P erf or ma nc e M a na g e me nt — developing the practice of business decision-ma k in g
a nd managing the performance of the organization.
• Variable costing— contributing to frameworks and practices for identifying, measuring,
managing and reporting risks to the achievement of the objectives of the organization.

2.Objectives of Management Accounting

A. The base objectives of management accounting are to assist the management in carrying out
its duties efficiently. The objectives of Management Accounting are: -
• The computation of plans and budgets covering all aspects of the business.
Example: production, selling, distribution, research and finance.
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• The systematic allocation of responsibilities for implementation of plans and budgets.
• The organization for providing opportunities and facilities for performing responsibilities.
• The analysis of all transactions, financial and physical, to enable effective comparison to be
made between the forecasts and actual performance.
• The presentations of up to date information, at frequent intervals, to management in the
form of operating statements.
• The statistical interpretation of such statements in a manner which will be of utmost
assistance to management in planning future policy and operation.
B. The fundamental objectives of management accounting is to enable the management to
maximize profits or minimize losses. The evolution of management accounting has given an
approach to the function of accounting. The main objectives of management accounting are
as follows:
Planning and policy formulation:
Planning involves forecasting on the basis of available information, setting goals; framing
polices d e t e r m i n i n g the alternative courses of action and deciding on the program of
activities. Management accounting can help greatly in this direction. It facilitates the
preparation o f statements in the light of past results and gives estimation for the future.
I interpretation process:
Management accounting is to present financial information to the management. Financial
information is technical in nature. Therefore, it must be presented in such a way that it is
easily understood. It presents accounting information with the help of statistical devices like
charts, diagrams, graphs, etc.8
Assists in Decision-making process:
With the help of various modern techniques management accounting makes decision-
ma k in g process more scientific. Data relating to cost, price, profit and savings for each of
the available alternatives are collected and analyzed and provides a base for taking sound
decisions.
Controlling:
Management accounting is a useful for managerial control. Management accounting tools
like standard costing and budgetary control are helpful in controlling performance. Cost
control is affected through the use of standard costing and departmental control is made
possible through the use of budgets. Performance of each and every individual is controlled
with the help of management accounting.
Reporting:
Management accounting keeps the management fully informed about the latest position of
the c o n c e r n through reporting. It helps management to take proper and quick decisions.
The performance of various departments is regularly reported to the top management.
Facilitates Organizing:
“Return on Capital Employed” is one of the tools of management accounting. Since
management accounting stresses more on Responsibility Centers with a view to control
costs and responsibilities, it also facilitates decentralization to a greater extent. Thus, it is
helpful in setting up effective and efficiently organization framework.
Facilitates Coordination of Operations:
Management accounting provides tools for overall control and coordination of business
operations. Budgets are important means of coordination.
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3.*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

Financial Accounting: Management Accounting

Format: Financial accounts are supposed No specific format is designed
to be in accordance with a for management accounting
specific format by IAS so that systems.
financial accounts of different
organizations can be easily
compared.
Planning Financial accounting helps in Management Accounting helps
and making investment decision, in management to record, plan and
control: credit rating. control activities to aid decision-
making process.
Focus: Financial accounting focuses on Management accounting focuses
history. on future.
Users: Financial accounting reports are Management accounting reports
primarily used by external users, are exclusively used by internal
such as shareholders, bank and user’s viz. managers and
creditors. employees.
External A financial accounting system A management accounting
Vs. produces information that is used system produces information that
Internal: by parties external to the is used within an organization,
organization, such as by managers and employees.
shareholders, bank and creditors.

4.*Explain the role of Management Accounting in Planning and control in a bank.

Pdf

5.*Management Accounting is beneficial for banking operation - comments with the

example. Pdf

6.*Management Accounting is helpful in decision making-discuss the statement.

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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.

7.*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 company’s 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.

8.*Describe the necessity of Financial Statement Analysis.

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.
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

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effectiveness of their action to realize the company's goal in the past. For that purpose,
financial statement analysis is important to the company's management.
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.
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.

9.*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.

10.*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 company’s 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 company’s equity throughout the reporting period.
3. Financial statement analysis provides information about cash flows which helps to prepare
report on company’s cash flow activities, particularly its operating, investing and financial
activities.

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