FMA PROJECT WORK

project work on management accounting

submitted by:
 prawesh agrawal
 +2 second year (commerce)
 Chse roll no:
 Registration no:

guided by:

 mr.baishnab goud
 lecturer in commerce

singnature of internal:
singnature of external:
singnature of student:
date of submission:

annual higher examination 2023

DAV AUTONOMOUS COLLEGE,TIG

 CERTIFICATE
THIS IS CERTIFY THAT THE PROJECT REPORT
TITLED,”INTRODUCTION TO MANAGEMENT ACCOUNTING”,HAS BEEN
PREPARED BY prawesh agrawal UNDER THE GUIDANCE AND
SUPERVISION .I ALSO CERTIFY THAT THE PROJECT IS IN
ACCORDANCE WITH THE SYLLABUS ISSUED BY CHSE ODISHA.

MR.BAISHNAB GOUD

LECTURER IN COMMERCE
 ACKNOWLEDGEMENT
I AM EXTREMELY GRATEFUL OF mr.baishnab goud ,LECTURER
IN COMMERCE FOR HIS KIND CONSENT TO SUPERVISE MY
WORK AND GAVE THE REQUIRED GUIDANCE FOR THE
COMPLETION OF THIS PROJECT .HE HAS BEEN SOURCE OF MY
INSPIRATION DURING THE COMPLIANCE OF MY PROJECT
WORK.

PRAWESH AGRAWAL
IC 22.002
 Abstract
This project aims to understand management accounting . management accounting
provides all possible information required for managerial purpose. This project includes
meaning of management accounting and different definations by different persons and
institution. Objectives of management accounting how it is done through the presentation
of statement in such a way that management is able to take correct decisions,
characteristics or nature of management accounting involves furnising of accounting data to
the management for basing its decisions on it, scope of management accounting to help
management in its fuctions of planning , directing , and controlling. Functions of
management accounting to classifying presenting and interpreting data in such a way to
hepls in management in controlling and running the enterprise .need and importance of
management accounting to guide and advise the management in every step and limitations
of management accounting .

Relevance of the project

1.To study what is management accounting briefly.

2. how management accouniting hepls the management to take the correct decisions.

3.to know the objectives, characterictics, scope, functions and need and importance of
management accounting.

4.to study the impact of management accounting in management.

TABLE OF CONTENTS
1.meaning and definations of management accounting
2.objectives of management accounting
3.nature of management accounting
4.scope of management accounting
5.functions of management accounting
6.need and importance of management accounting
7.limitations of management accounting
MEANING OF MANAGEMENT ACCOUNTING
Management accounting is comprised of two words ‘management’ and ‘accounting’. It is
the study of managerial aspect of accounting . The emphasis of management accounting is
to redesign accounting in such a way that it is helpful to the management in formation of
policy,control of execution and appreciation of effectiveness.It is thet system of accounting
which helps management in carrying out its functions more efficiently.

DEFINITIONS OF MANAGEMENT ACCOUNTING

1.ANGLO-AMERICAN COUNCIL ON PRODUCTIVITY: “management accounting is the
presentation of accounting information in such a ways as to assist management in the
creation of policy and the day-to-day operation of an undertaking.”

2.ROBERT N.ANTHONY:”management accounting is concerned with accounting information

that is useful to management.”

3. H.M. TREASURY: “the application of accounting knowlegde to the purpose of producing

and of interpreting accounting and statistical information designed to assist managrment in
its functions of promoting maximum efficiency and in formulating and coordinating future
plans and subsequently in measuring their execution.”

4. INSTITUTE OF CHARTERED ACCOUNTANTS OF ENGLAND AND WALES: “any form of

accounting which enables a business to be conducted more efficiently can be regarded as
management accounting.”

5. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA: “such of its techniques and

procedures by which accounting Mainly seeks the aid the management collectively have
come to be known as management accounting.”

6. THE INSTITUTE OF COST & WORKS ACCOUNTANTS OF INDIA defines management

accounting as “a system of collection and presentation of relevant economic information
relating to an enterprise for planning , controlling and decision making.”
 OBJECTIVES OF MANAGEMENT ACCOUNTING

planning and policy formulation

helpful in controlling performance

helpful in organising

helpful in interpreting financial statements

motivating employees

helpful in making decisions

reporting to mangement

helpful in coordoination

tax administration

1.PLANNING AND POLICY FORMULATION :- the object of management accounting is to

supply necessary data to the management for formulating plans. Planning is essentially
related to taking decisions for future.it includes forecasting, setting goals and deciding
alternative courses of action. Mangement accountant prepares statements of past results
and gives estimations for the future. The figures supplied and opinion given by the
mangement accountant helps management in planning and policy formation.

2. HELPFUL IN CONTROLLING PERFORMANCE :- management accounting devices like

standard costing and budgetary control are helpful in controlling performance. The work is
divided into different units an separated goals are set up for each unit. The perfoemance of
every unit is made the responsibility of particular person. The required authority for getting
the work done is also delegated to the concerned persons. The actual results are compared
with predetermined objectives. The management is able to find out the deviations and take
neccesary corrective measures.
3.HELPFUL ON ORGANISING:- organisation is related to the establisment of realationship
among different individuals in the concern . it also includes the delegation of authority and
fixing of responsibility. Mangement accounting is connected with the establishment of cost
centers, preparation of budgets, preparation of cost control accounts and fixing of
responsible for different functions.

4 .HELPFUL IN INTERPRETING FINANCIAL INFORMATION:- the main object of management

accounting is to present financial information to the management in such a way that is
easily understood . Financial information is of a technical nature and managerial personnel
may not be able to understand the significant and utility of various financial statements.

5. MOTIVATING EMPLOYEES: - management accounting helps the management in selecting

best alternatives of doing the things. Targets are laid down for the employees. They feel
motivated in achieving their targets and further incentives may be given for improving their
performance.

6. HELPFUL IN MAKING DECISIONS: - the management has to take certain important

decisions. A Decision may have to be taken about the expansion or diversification of
production. There may be a questions of replacement of labor with machine or introduction
of latest technological devices.

7. REPORTING TO MANAGEMENT: - one of the primary objectives of management

accounting Is to keep the management fully informed about the latest of the concern. This
helps the management in taking proper and timely decisions. the management is kept
informed through regular financial and other reports.

8.HELPFUL IN CO-ORDINATION:- management accounting provides tools which are helpful

on coordinating the activities of different sections or departments . co-ordination is done
through functional budgeting. Management accountant acts as a co-ordinator and
reconciles the activities of different sections.

9.HELPFUL IN TAX ADMINISTRATION:- the complexities of tax system are increasing every
day. Management accounting helps in assessing various tax abilities and depositing correct
amount of taxes with the concerned authorities.
 CHARACTERISTICS OF MANAGEMENT ACCOUNTING
PROVIDING ACCOUNTING INFORMATION

CAUSE AND EFFECT METHOD

USE OF SPECIAL TECHNIQUES

TAKING IMPORTANT DECISIONS

ACHEVING OF OBJECTIVES

NO FIXED NORMS FOLLOWED

INCREASE IN EFFICENCY

SUPPLIES INFORMATIND NOT DECISIONS

CONCERNED WITH FORECASTING

1.PROVIDING ACCOUNTING INFORMATION:- Management Accounting is a service function and it

provides necessary information to different levels of management. Management Accounting
involves the presentation of information in a way that suits the managerial needs. The accounting
data collected by accounting department is used for reviewing various policy decisions.

2. CAUSE AND EFFECT ANALYSIS :-The role of financial accounting is limited to find out the ultimate
result, i.e., profit and loss, whereas management accounting goes a step further. Management
Accounting discusses the cause and effect relationship. The reasons for the loss are probed and the
factors directly influencing the profitability are also analyzed. Profits are compared to sales, different
expenditures, current assets, interest payables, share capital, etc. to give meaningful interpretation.

3. USE OF SPECIAL TECHNIQUES AND CONCEPTS:- Management Accounting uses special

techniques and concepts according to necessity, to make accounting data more useful. The
techniques usually used include financial planning and analyses, standard costing, budgetary control,
marginal costing, project appraisal etc.
4. Aids in Taking Important Decisions It supplies necessary information to the management which
may be useful for its decisions. The historical data is studied to see its possible impact on future
decisions. The implications of various decisions are also taken into account.

5. Aims at Achieving Objectives Management Accounting uses the accounting information in such a
way that it helps in formatting plans and setting up objectives. Comparing actual performance with
targeted figures will give an idea to the management about the performance of various
departments. When there are deviations, corrective measures can be taken immediately with the
help of budgetary control and standard costing.

6. NO FIXED NORMS:- No specific rules are followed in management accounting as that of financial
accounting. Though the tools are the same, their use differs from concern to concern. The deriving
of conclusions also depends upon the intelligence of the management accountant. The presentation
will be in the way which suits the concern most.

7. IMPROVES EFFICIENCY :- The purpose of using accounting information is to increase efficiency of

the concern. The performance appraisal will enable the management to pin-point efficient and
inefficient spots. Efforts are made to take corrective measures so that efficiency can be improved.
The constant review will make the staff cost conscious.

8. DELIVERS INFORMATION AND NOT DECISION:- Management accountant is only to guide to take
decisions. The data is to be used by the management for taking various decisions. ‘How is the data to
be utilized’ will depend upon the caliber and efficiency of the management.

9. CONCERNED WITH FORECASTING:-The management accounting is concerned with the future. It

helps the management in planning and forecasting. The historical information is used to plan future
course of action. The information is supplied with the object to guide management for taking future
decisions.
 SCOPE OF MANAGEMENT ACCOUNTING

FINANCIAL ACCONTING

COST ACCOUNTING

FINANCIAL MANAGEMENT

BUDGETING AND FORECASTING

INVENTORY CONTROL

REPORTING TO MANAGEMENT

INTERPRETATION OF DATA

CONTROL PROCEDURES AND METHODS

INTERNAL AUDITS

TAX ACCOUNTING

OFFICE SERVICES

1.FINANCIAL ACCOUNTING:- financial accounting deals with the historical data. The
recorded facts about an organisation are useful for planning the future course of action.
Though planning is always for the future but still it has to be based on past and present
data.

2.COST ACCOUNTING:- cost accounting provides various techniques foe determining cost of
manufacturing products or cost of providing service. It uses financial data for finding out
cost of various jobs, products or peocesses. The performance appraisal is based on recorded
facts and figures.

3.FINANCIAL MANAGEMENT:- financial management is concerned with the planning and

controlling of the financial resources of the firm. It deals with raising of funds and their
effective utilisation. Its main aim is to use business funds in such way that earnings are
maximised.
4.BUDGETING AND FORECASTING:- budgeting means expressing the plans,policies and goals
of the enterprise for a definite period in future. The targets are set for different
departments and responsibility is fixed for acheving these targets. Forecasting on the other
hands,is a prediction of what will happen as result of a given set of circumstances.

5.INVENTORY CONTROL:- inventory is used to denote stock of raw material, goods in the
process of manufacture and finished products. Inventory has a special significance in
accounting for determining correct income for a given period.

6.REPORTING TO MANAGEMENT:- one of the functions of mangement accountant is to keep

the management informed of various activities of the concern so as to assist it in controlling
the enterprise the reports are presented in the form of graph, diagrams ,index numbers or
other statistical techniques so as to make them easily understandable.

7.INTERPRETATION OF DATA:- the mangement accountant interprets various financial

statement to the mangement. These statement give an idea about the financial and earning
position of the concern.

8.CONTROL PROCEDURES AND METHODS:- control procedures and methods are needed to
use various factors of production in a most economical way. The studies about cost,
relationship of cost and profits are useful for using economic resources.

9.INTERNAL AUDIT:- internal audit system is neccesary to judge the performance of every
department . the actual performance of every department and individual is compared with
the pre-determined standards.

10.TAX ACCOUNTING:- in the present complex tax system , tax planning is an important part
of management accounting . income statements are prepared and tax laibilities are
calculated.

11.OFFICE SERVICES:- mangement accounting may be required to control an office. He will

be expected to deal with data processing, filling, copying , duplicating, communicating, etc.
he will also be reporting about the utility of different office machines.
 FUNCTIONS OF MANAGEMENT ACCOUNTING
Management accounting is a part of accounting. Management accounting is assigned the
functions of classifying presenting and interpreting data in such a way that it helps
mangement in controlling and running the enterprise in an efficient and economical
manner.

1. PLANNING AND FORECASTING:- mangement fixes varioud targets to be achieved by

the business in near future . planning and forecasting are essential foe acheving
business objectives . one of the important functions of the mangement accounting is
to help mangement in planning foe short-term and long term periods and also in
making forecastes for the future.

2.MODIFICATION OF DATA:- management accounting hepls in modifying accounting

data. The information is modified in such a way that it becomes useful for the
management . the modification of data in similar groups makes the data more
understable and useful.
3.FINANCIAL ANALYSIS AND INTERPREATATION:- mangement accountant undertakes the
job of presenting financial data in a simplify way. Financial data is generally collected
and presented in a technical way. Management accountant analyses and interprets the
data in a simple way.

4.FACILITATING MANEGEREIAL CONTROL:- management accounting is very useful in

controlling performance. All accounting efforts are directed towards control of the
enterprise. The standards of various departments and individuals are set-up.

5.COMMUNICATION:- management accounting establish communication within the

organisation an the outside world. The mangement accountant prepares reportes for
the benefit of different level of mangement and employees.

6.USE OF QUALITATIVE INFORMATION:- while preparing a production budget ,

mangement accountant may not only use past production figures, but the may rely on
the assessment of persons dealing with the production,productivity reports etc.

7. CO-ORDINITING :- the co-ordination among different departments is essential for

smooth running of the concern . Mangement accountant acts as a co-ordinator among
different financial departments through budgeting and financial reports.the targets and
performances of different departments are communicated to them from time- to- time.

8.TAKING STARTEGIC DECISIONS:- management accounting helps in taking strategic

decisions. it supplies analytical information regarding various alternatives and the choice
of mangement is made easy.

9.SUPPLYING INFORMATION TO VARIOUS LEVELS OF MANGEMENT:- every mangement

level needs accounting information for decisions Making and policy execution . top
mangement takes broader decisions and leaves day-to-day decisions for the lower levels
of mangement.
NEED AND IMPORTANCE OF MANGEMENT ACCOUNTING

1.INCREASES EFFICIENCY:- mangement accounting increases efficiency of business

operations. The targets of different departments are fixed in advance and the achievements
of these goals is a tool for measuring their efficiency.

2.PROPER PLANNING:- management is able to plan various operations with the help of
accounting information . the technique of bugeting is helpful in forecasting various
activities. Budgets are prepared department wise firstly and then a master budget is
prepared for the whole organisation.

3.MEASUREMENTS OF PERFORMANCE:- the system of budgetary control and standard

costing enable the measurement of performance . in standard costing, standards are
determined and then the actual cost is compared with standard cost. It enables the
management to find out deviations between standard and actual cost. The performance
will be good if actual cost doesnot exceed the standard cost.
4.MAXIMISING PROFITABILITY:- the thrust of various management techniques is to control
cost of production and increase efficiency of each and every individual in the organisation .
the steps of controlling costs are able to reduce cost of production . the profit of the
eneterprise are maximised with the help of management accounting system.

5.IMPROVES SERVICE TO COSTOMERS:- the cost control devices employed in management

accounting enable the reduction of prices. All employees in the concern are made cost
consious. The quality of products becomes good because quality standards are
predetermined.

6.EFFECTIVE MANAGEMENT CONTROL:- the tools and technique of mangement accounting

are heplful to the management in planning, co-ordianting and controlling activities of the
concern. The setting of standard and assessing actual performance regularly enables the
management to have “management by exception”.
 LIMITATIONS OF MANAGEMENT ACCOUNTING
Though management accounting is heplful in providing guidelines for planning , directing ,
and controlling functions,still its effectiveness is limited by a number of reasons.

Limitations of mangement accounting are explained as follows:

1.BASED ON ACCONTING INFORMATION:- managemant accounting is based on data

supplied by financial and cost accounting. Historical data is used to make future decisions. if
financial data is not relaible then management accounting will not provide correct analysis.

2.LACK OF KNOWLEDGE:- the use of management accounting requires the knowledge of a

number of related subjects. Management should be conversant with accounting principle,
statistics, economics, principle of mangement , etc.

3.INTUTIVE DECISIONS:- though management accounting provides scientific analysis of

various situations and enables deisions taking based on facts and figures , there is a
tendency to make decisions intuitively.

4.NOT A ALTERNATIVE TO ADMINISTRATION:- the tools and techniques of management

accounting provides only information and not decisions.

5.TOP HEAVY STUCTURE:- the installation of a mangement accounting system needs an

elaborate organisational system. A large number of rules and regulations are also required
to make this system workable and effective.

6.EVOLUTIONARY STAGE:- management accounting is only in a developmental stage , it has

not yet reached a final stage. The techniques and tools used by this system give varying and
differing results.

7.PERSONAL BIAS:- the interpretation of financial information depends upon the capability
of interpreter as one has to make a personal judgement. There is every likelihood of
personal bias in analysis and interpretation.
Summery
Management accounting is a method of accounting that creats statements, reports, and
documents that help management in making better decisions related to their business
performance. Managerial accounting is primarily used for internal purposes. The main
objective of management accounting is to assist the management of a company in efficient
performing its functions. Management accounting is to maximize profit and minimize
losses.

Conclusion
Management accounting helps in analysing and recording financial information which can
be used by a company to increases its efficiency and productivity. It presents the financial
information in regulat intervales using easy-to-understand techniques such as standard
costing, marginal costing, project appraisal, and control accounring. Howerver, the
information required to make managerial decisions depends completely on financial
statements. Hence it becomes important to maintain error free records. Besides several
disadvantages, it acts as a useful tool for better management of business.

References:
 book name: fundamental of mangement accounting
 Authors name: shashi k. gupta, r.k. shrma, anuj gupta
 Year: 2023
 Page no: 1.11 – 1.29

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