Q. Management Accounting is helpful in decision making-discuss the statement, and distinguish between Financial Accounting and Management Accounting and also discuss Management Accounting is beneficial for banking operation - comments with the example (June'14).
Q. Management Accounting is helpful in decision making-discuss the statement (June'14).
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.
1. 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.
2. 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.
3. 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.
4. 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.
Q. Distinction between Financial Accounting and Management Accounting (June’14).
1. Financial accounting is the process of measuring a company’s assets, liabilities and equity. On the other hand, Management accounting is an internal function that allocates materials, labor and overhead costs to products.
2. Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders.
3. While financial accounting must conform to Generally Accepted Accounting Principles (GAAP), Management accounting is prepared according to management guidelines, since it only reports information to internal users.
4. Financial accounting allows outside users to review a company’s financial health and determine if they want to invest in the company. On the other hand Management accounting ensures all goods or services produced is accurately priced to recover all production costs.
5. Companies that fail to implement a strong mix of financial and management accounting may have an imperfect accounting work flow that cannot report the company’s financial information in a timely and accurate manner.
6. There is no legal requirement for an organization to use management accounting but publicly-traded firms (limited companies or whose shares are bought and sold on an open market) must, by law, prepare financial account statements.
7. In management accounting systems there is no requirement for an independent external review but financial accounting annual statements must be audited by an independent CPA firm.
8. In management accounting systems, management may be concerned about how reports will affect employee’s behavior whereas management concerns are about the adequacy of disclosure in financial statements.
9. Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information. There is no time span for producing managerial accounting statements but financial accounting statements are generally required to be produced for the period of 12 previous months.
10. Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost canters.
1. Financial accounting is the process of measuring a company’s assets, liabilities and equity. On the other hand, Management accounting is an internal function that allocates materials, labor and overhead costs to products.
2. Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders.
3. While financial accounting must conform to Generally Accepted Accounting Principles (GAAP), Management accounting is prepared according to management guidelines, since it only reports information to internal users.
4. Financial accounting allows outside users to review a company’s financial health and determine if they want to invest in the company. On the other hand Management accounting ensures all goods or services produced is accurately priced to recover all production costs.
5. Companies that fail to implement a strong mix of financial and management accounting may have an imperfect accounting work flow that cannot report the company’s financial information in a timely and accurate manner.
6. There is no legal requirement for an organization to use management accounting but publicly-traded firms (limited companies or whose shares are bought and sold on an open market) must, by law, prepare financial account statements.
7. In management accounting systems there is no requirement for an independent external review but financial accounting annual statements must be audited by an independent CPA firm.
8. In management accounting systems, management may be concerned about how reports will affect employee’s behavior whereas management concerns are about the adequacy of disclosure in financial statements.
9. Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information. There is no time span for producing managerial accounting statements but financial accounting statements are generally required to be produced for the period of 12 previous months.
10. Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost canters.
Q. Management Accounting is beneficial for banking operation - comments with the example (June'14).
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
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