File Name: financial planning and cost accounting .zip
Management accounting is the provision of financial and non-financial decision-making information to managers.
The following points highlight the top eleven techniques management accounting. The techniques are: 1. Financial Planning 2. Analysis of Financial Statements 3. Historical Cost Accounting 4. Standard Costing 5.
Budgetary Control 6. Marginal Costing 7. Funds Flow Statement 8. Cash Flow Statement 9. Decision Making Revaluation Accounting Statistical and Graphical Techniques Financial planning is the act of deciding in advance about the financial activities necessary for the concern to achieve its primary objectives.
It includes determining both long term and short term financial objectives of the enterprise, formulating financial policies and developing the financial procedure to achieve the objectives. The role of financial policies cannot be emphasized to achieve the maximum return on the capital employed. Financial policies may relate to the determination of the amount of capital required, sources of funds, govern the determination and distribution of income, act as a guide in the use of debt and equity capital and determination of the optimum level of investment in various assets.
The analysis is an attempt to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for future earnings, ability to pay interest and debt maturities and profitability of a sound dividend policy. The techniques of such analysis are comparative financial statements, trend analysis, cash funds flow statements and ratio analysis. This analysis results in the presentation of information which will help the business executives, investors and creditors.
The historical cost accounting provides past data to the management relating to the cost of each job, process and department so that comparison may be made with the standard costs.
Such comparison may be helpful to the management for cost control and for future planning. Standard costing is the establishment of standard costs under most efficient operating conditions, comparison of actual with the standard, calculation and analysis of variance, in order to know the reasons and to pinpoint the responsibility and to take remedial action so that adverse things may not happen again.
This aspect is necessary to have cost control. The management accountant uses the tool of budgetary control for planning and control of the various activities of the business.
Budgetary control is an important technique of directing business operations in a desired direction, i. The management accountant uses the technique of marginal costing, differential costing and break even analysis for cost control, decision-making and profit maximisation. The management accountant uses the technique of funds flow statement in order to analyse the changes in the financial position of a business enterprise between two dates. It tells wherefrom the funds are coming in the business and how these are being used in the business.
It helps a lot in financial analysis and control, future guidance and comparative studies. A funds flow statement based on increase or decrease in working capital is very useful in long-range financial planning.
It is quite possible that there may be sufficient working capital as revealed by the funds flow statement and still the company may be unable to meet its current liabilities as and when they fall due. It may be due to an accumulation of inventories and an increase in trade debtors. In such a situation, a cash flow statement is more useful because it gives detailed information of cash inflows and outflows.
Cash flow statement is an important tool of cash control because it summarises sources of cash inflows and uses of cash outflows of a firm during a particular period of time, say a month or a year. It is very useful tool for liquidity analysis of the enterprise. Whenever there are different alternatives of doing a particular work, it becomes necessary to select the best out of all alternatives. This requires decision on the part of the management. The management accounting helps the management through the techniques of marginal costing, capital budgeting, differential costing to select the best alternative which will maximise the profits of the business.
The management accountant, through this technique assures the maintenance and preservation of the capital of the enterprise. It brings into account the impact of changes in the prices on the preparation of the financial statements.
The management accountant uses various statistical and graphical techniques in order to make the information more meaningful and presentation of the same in such form so that it may help the management in decision-making. The success or failure of the management is dependent on the fact, whether requisite information is provided to the management in right form at the right time so as to enable them to carry out the functions of planning, controlling and decision-making effectively.
The management accountant will prepare the necessary reports for providing information to the different levels of management by proper selection of data to be presented, organisation of data and selecting the appropriate method of reporting.
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The following points highlight the top eleven techniques management accounting. The techniques are: 1. Financial Planning 2. Analysis of Financial Statements 3. Historical Cost Accounting 4. Standard Costing 5. Budgetary Control 6.
Relationship of Cost Accounting, Financial Accounting, Management Accounting and Differential costs is useful in planning and decision making and helps to.
You can imagine what the situation will be before things happen, and you are offered the opportunity to take action in time. If you notice that the costs will be too high, you can examine measures to lower them. By using financial forecasts, you will add value to your management.
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The budget also provides an important tool for the control and evaluation of sources and the uses of resources. Using the accounting system to enact the will of the governing body, administrators are able to execute and control activities that have been authorized by the budget and to evaluate financial performance on the basis of comparisons between budgeted and actual operations. Thus, the budget is implicitly linked to financial accountability and relates directly to the financial reporting objectives established by the GASB. The planning and control functions inherent to any organization, including schools, underscore the importance of sound budgeting practices for the following reasons: The type, quantity, and quality of goods and services provided by governments often are not subject to the market forces of supply and demand. Thus, enacting and adhering to the budget establishes restrictions in the absence of a competitive market.
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