Management Accounting

Cover
Management Accounting
	Copyright
Contents
Preface
Introduction to Management Accounting
	Definition of Management Accounting
	Nature or Features of Management Accounting
	Scope of Management Accounting
	Objectives of Management Accounting
	Role or Functions of Management Accounting
	Utility of Management Accounting
	Limitations of Management Accounting
	Tools and Techniques of Management Accounting
	Requisites for Installation of Management Accounting System
	How Does Management Accounting Differ from the other Branches of Accounting
		Management Accounting and Financial Accounting
		Management Accounting and Cost Accounting
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Analysis and Interpretation of Financial Statements
	Meaning of Financial Statements
	Characteristics of Financial Statements
	Anatomy/Components of Financial Statements
		Income Statement or Profit & Loss Account
		Balance Sheet
		Statement of Changes in Financial Position
	Relationship Between Income Statement and Balance Sheet
	Concept of Financial Statement Analysis
	Objectives of Financial Statement Analysis
	Requisites of Financial Statement Analysis
	Different Approaches to Financial Statement Analysis
		Traditional Approach to Financial Statement Analysis
		Modern Approach to Financial Statement Analysis
	Types of Financial Statement Analysis
	Techniques/Tools of Financial Statement Analysis
	Comparative Financial Statement Analysis
		Concept of Comparative Financial Statement Analysis
		Advantages of Comparative Financial Statement Analysis
		Disadvantages of Comparative Financial Statement Analysis
	Common-size Financial Statement Analysis
		Concept of Common-size Financial Statement Analysis
		Advantages of Common-size Statement
		Disadvantages of Common-size Statement
		Comparative Statement vs. Common-size Statement
	Trend Analysis
		Concept of Trend Analysis
		Steps in Computing Trend Values
		Advantages of Trend Analysis
		Disadvantages of Trend Analysis
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Accounting Ratios for Financial Statement Analysis
	Financial Statements
	What is a Ratio?
	What is an Accounting Ratio?
	What is Ratio Analysis?
	Steps in Ratio Analysis
	Role or Importance of Ratio Analysis
	Uses of Ratio Analysis
	Advantages of Ratio Analysis
	Limitations of Ratio Analysis
	Parties Interested in Ratio Analysis
	Different Kinds of Ratios or Classification of Ratios
	Standard or Ideal Ratio
	Computation of Proprietors’ Fund, Capital Employed, Working Capital
	Calculation and Interpretation of Various Ratios
		Balance Sheet Ratios
		Revenue Statement Ratio
		Mixed or Composite Ratio
	DU Pont Analysis
	Ratios to be used in Determining Solvency, Performance, Managerial Efficiency etc. of an Enterprise
	Different Ratios at Glance
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Cash Flow Analysis
	What is Cash?
	Difference Between Cash and Fund
	What is Cash Flow Statement?
	Why is Cash Flow Statement Prepared?
	Importance of Cash Flow Statement
	Uses of Cash Flow Statement
	Advantages of Cash Flow Statement
	Limitations of Cash Flow Statement
	Differences Between Cash Book and Cash Flow Statement
	Differences Between Cash Flow Statement and Fund Flow Statement
	Proforma of Cash Flow Statement Prepared under Traditional/Conventional Method
	Cash Flow Statement as Prescribed in AS-3
		Cash Flows from Operating Activities
		Cash Flows from Investing Activities
		Cash Flows from Financing Activities
	Proforma of Cash Flow Statement as Prescribed in AS-3
		Proforma of Cash Flow Statement under Direct Method
		Proforma of Cash Flow Statement under Indirect Method
	Fundamental Differences Between Cash Flow Statement as per AS-3 and Traditional Method
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Fund Flow Analysis
	Meaning and Concept of Fund
	Generally Accepted Concept of Fund
	Meaning of Flow of Fund
	What is Fund Flow Statement?
	Importance or Purposes of Fund Flow Statement
	Limitations of Fund Flow Statement
	Proforma of Presentation of Fund Flow Statement
	Different Sources of Fund
	Different Applications of Fund
	What is Fund from Operation?
	Different Approaches of Computation of Fund from Operation
		Direct Approach of Computation of Fund from Operation
	Is Depreciation a Source of Fund?
	Comparison between Fund Flow Statement, Income Statement and Balance Sheet
	Distinction between Fund Flow Statement and Cash Flow Statement
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Working Capital
	Meaning and Concept of Working Capital
	Importance of Working Capital
	Need for Working Capital
	Different Concepts and Classification of Working Capital
		Classification of Working Capital on the Basis of Concept
		Classification of Working Capital on the Basis of Time
	Sources of Working Capital
		Sources of Permanent Working Capital
		Sources of Temporary Working Capital
	Determinants of Working Capital
	Components of Working Capital
	Positive and Negative Working Capital
	Working Capital or Operating Cycle
	Estimation or Forecasting of Working Capital
	Procedure for Estimation/Forecasting of Working Capital
	Valuation of Stock of Work-In-Progress
	Different Approaches of Estimation/Forecasting of Working Capital
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Budget and Budgetary Control
	Meaning of Budget
	Meaning of Budgeting
	Features of Budget
	Budgetary Control
	Objectives of Budgetary Control
	Advantages of Budgetary Control
	Limitations of Budgetary Control
	Comparison between Budget and Budgetary Control
	Comparison between Standard Costing and Budgetary Control
	Zero-Based Budgeting
	Classification or Types of Budget
		Classification on the Basis of Period
		Classification on the Basis of Flexibility of Production
		Classification on the Basis of Function or Coverage
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Standard Costing and Variance Analysis
	What is Standard Cost?
	What is Standard Costing?
		Features of Standard Costing
	Preliminary Steps for Establishing Standard Costing System
	Types of Standards
	Distinction between Standard Cost, Estimated Cost and Actual/Historical Cost
	Advantages of Standard Costing
	Limitations of Standard Costing
	Comparison between Standard Costing and Budgetary Control
	Analysis of Variance
		Direction of Variances
		Nature of Variances
		Purposes of Variance Analysis
	Classification of Variances
		Material Variances
		Labour Variances
		Variable Overhead Variances
		Fixed Overhead Variances
		Sales Value Variances
		Sales Margin (Profit) Variances
	Formulae of Various Variances at a Glance
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Absorption Costing and Variable Costing
	Absorption Costing
	Features of Absorption Costing
	Advantages of Absorption Costing
	Limitations of Absorption Costing
	Variable Costing
	Features of Variable Costing
	Advantages of Variable Costing
	Limitations of Variable Costing
	Income Determination under Absorption Costing and Variable Costing
		Income Determination under Absorption Costing Technique
		Income Determination under Variable Costing Technique
	Distinction between Absorption Costing and Variable Costing
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Marginal Costing and Cost–Volume–Profit Analysis
	Concept of Marginal Cost
	Definition of Marginal Costing
	Features of Marginal Costing
	Advantages of Marginal Costing
	Limitations of Marginal Costing
	Meaning of Cost–Volume–Profit (CVP) Analysis
	Features of CVP Analysis
	Objectives of CVP Analysis
	Assumptions Underlying CVP Analysis
	Classification of Cost Under CVP Analysis
	Elements of CVP Analysis
	Break-Even Analysis
	Break-Even Chart
		Presentation of BE Chart
	Angle of Incidence
	Mathematical Representation of CVP Analysis
	Different Formulae of CVP Analysis at a Glance
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Decision Making
	Concept of Decision Making
	Steps in Decision Making
	Cost Concepts in Decision Making
	Concept of Relevant Cost and Relevant Revenue
	Comparison of Differential Cost Analysis and Marginal Costing
	Concept of Key or Limiting Factor
	Different Situations of Decision Making
		Determination of Most Profitable Product/Sales Mix
		Accept or Reject Decision
		Make or Buy Decision
		Operate or Shut-Down Decision
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Capital Budgeting
	Concept of Capital Budgeting
	Features of Capital Budgeting
	Importance of Capital Budgeting
	Types of Investments
	Types of Capital Budgeting Decisions
	Evaluation Criteria of Capital Budgeting Decisions
	Concept of Present Value
	Determination of PV Factor or Discounting Factor
	Concept of Discounted Cash Flow
	Capital Budgeting Techniques
		Non-discounted Techniques
		Discounted Cash Flow Techniques
	Worked-out Problems
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Responsibility Accounting
	Meaning and Concept of Responsibility Accounting
	Prerequisites of Responsibility Accounting
	Assumptions of Responsibility Accounting
	Advantages or Benefits or Purposes of Responsibility Accounting
	Limitations of Responsibility Accounting
	Responsibility Centre
	Types of Responsibility Centres
		Cost Centre
		Profit Centre
		Investment Centre
	Controllable and Non-controllable Costs
	Responsibility Reporting
	Types of Responsibility Reports
	Chapter Review Summary
	Chapter Review Quiz
	Exercise
Appendix