ACCOUNTING FOR

MANAGEMENT
Ref Book: M. Y. Khan & P. K. Jain,
Management Accounting
R. Narayanaswamy, Financial Accounting.

UNIT - I FINANCIAL ACCOUNTING

Introduction to Financial, Cost and

Management Accounting
Generally accepted accounting principles,

Conventions and Concept

Balance sheet and related concepts
Profit and Loss account and related concepts
Introduction to inflation accounting
Introduction to human resources accounting.

UNIT -II COMPANY ACCOUNTS

Meaning of Company
Maintenance of Books of Account
Statutory Books- Profit or Loss Prior to

incorporation
Final Accounts of Company
Alteration of share capital
Preferential allotment
Employees stock option
Buy back of securities

UNIT -III ANALYSIS OF FINANCIAL

STATEMENTS
Analysis of financial statements
Financial ratio analysis
Cash flow (as per Accounting Standard 3)
& Funds flow statement analysis.

UNIT -IV COST ACCOUNTING

Cost Accounts
Classification of manufacturing costs
Accounting for manufacturing costs.
Cost Accounting Systems:
Job order costing
Process costing
Activity Based Costing- Costing and the value chain-

Target costing
Marginal costing including decision making
Budgetary Control & Variance Analysis - Standard cost

system.

UNIT -V ACCOUNTING IN
COMPUTERIZED ENVIRONMENT
Significance of Computerized Accounting

System
Codification and Grouping of Accounts
Maintaining the hierarchy of ledgers
Prepackaged Accounting software.

INTODUCTION
Indian Accounting Standards(abbreviated asIndia

AS)areasetofaccountingstandardsnotifiedbythe
MinistryofCorporateAffairswhichareconvergedwith
InternationalFinancialReportingStandards(IFRS)

INTODUCTION
These accounting standards are formulated by

Accounting

Standards

Board

of

Institute of Chartered Accountants of Indi

a
. Now India will have two sets of accounting
standards viz. existing accounting standards
under Companies (Accounting Standard) Rules,
2006 andIFRSconverged Indian Accounting
Standards(Ind AS)

OBJECTIVE
The basic objective of Accounting Standards is to

remove variations in the treatment of several

accounting

aspects

and

to

bring

about

standardization in presentation. They intent to

harmonize the diverse accounting policies followed
in the preparation and presentation of financial
statements by different reporting enterprises so as
to facilitate intra-firm and inter-firm comparison.

ACCOUNTING
Accounting

classifying

is

and

and

art

of

recording,

summarizing

in

significant manner and in terms of money,

transactions and events which are in part
at

least

of

financial

character

interpreting the results thereof

and

BOOK KEEPING
Book Keeping is the art of recording the

business transactions in a systematic and

regular manner.
According to Northcot Book keeping is

the art of recording in the books of

accounts

the

monetary

aspects

commercial and financial transactions.

of

BOOK KEEPING VS ACCOUNTING

Scope
Stage
Objective
Nature
Responsibility
Knowledge level
Supervision
Staff involved
Principle of accountancy.

OBJECTIVES OF FINANCIAL
ACCOUNTING
Keep Systematic Records
Protect Business Properties
Ascertain operational Profit or Loss
Ascertain Financial position of the business
Facilitate Rational Decision making
Determination of Tax Liability.

IMPORTANCE OF FINANCIAL
ACCOUNTING
Business forecasting
Correct decision making
Correct taxation
Replacing Memory
Assessing the performance of the business
Assessing the financial status of the business
Documentary evidence
Assisting in Realization of Debts
Preventing and Detecting frauds.

LIMITATIONS OF FINANCIAL
ACCOUNTING
Record of monetary transactions only.
Based on some estimates
No considerations of price level changes
Showing Imaginary assets
May be manipulated
Bound under certain concepts.

BRANCHES OF ACCOUNTING

Financial
accounting

Cost
Accounting

Management
accounting

BRANCHES OF ACCOUNTING
Financial accounting. The aim of this branch of accounting is to ascertain

the profit or loss made during a period and the financial state of affairs at
the end of the period and to maintain control over the firms property.
Cost Accounting: Its aim is to ascertain the cost incurred for carrying out

the various activities and to enable management to exercise cost control.

Management accounting: Here the aim is to supply the management

significance and necessary information in order to assist it in the

discharge of its functions such as decision making, control etc.,

USERS OF ACCOUNTING
INFORMATION

Internal Users

External Users

Owners/Proprietors
Managers
Employees

Creditors
Prospective Investors
Government
Customers
Foreigners
Researchers

BASIC TERMINOLOGY OF
ACCOUNTING
Sales
Goods

Sales Return

Assets

Stock Inventory

Liabilities
Capital
Proprietor

Debtors
Creditors
Solvent

Drawings

Insolvent

Revenues

Transactions

Expenses

Vouchers

Income

Invoice

Losses

Receipt

Purchase

Account

Purchase Return

Debit note
Credit note

INFLATION ACCOUNTING
Introduction:
Prices do not remain constant over a period

of time. They tend to change due to various

economic, social or political factors.
Changes in the price levels cause two types
of
economic
condition,
Inflation
and
Deflation.
Financial statements prepared at historical
cost fail to depict time and fair view of
financial position and correct profit due to
changes in value of money .

INFLATION ACCOUNTING
When there is inflation the value of money

is declining.
The steps taken for eliminating the impact
of inflation on financial statement is known
as Accounting for Inflation.