Chapter-01: Introduction.

[Link] of management accounting.

According to R.N. Anthony: “Management Accounting is concerned with accounting
information that is useful to management.”
Management Accounting refers to accounting information developed for manager
within the organization to fulfill organizational objectives.

[Link] about planning and controlling.

Planning: Planning involves setting goals, determining the actions needed to achieve those
goals, and developing a roadmap to guide the organization's activities. It helps in establishing
a clear direction, allocating resources, and making informed decisions.
Controlling: On the other hand, controlling involves monitoring and evaluating the progress
of goals and taking corrective actions when necessary. It includes comparing actual
performance with predetermined performance.
Planning and controlling are two essential functions of management that help organizations
achieve their goals and objectives effectively. Both planning and controlling are
interconnected each other. It allows them to adapt to changing circumstances, make informed
decisions, and achieve their desired outcomes.

[Link] about plan, estimation, forecast, and budget.

Plan: A plan is a strategy that outlines specific goals, objectives, and actions to be taken to
achieve those goals. It provides a roadmap for organizations to follow.
Estimation: Estimation involves making guesses or approximations about future based on
available information.
Forecast: Forecast refers to the predicting future trends, events, or outcomes based on
historical data, statistical models, and other relevant factors. It helps organizations anticipate
changes and make informed decisions.
Budget: A budget is a financial plan that outlines expected income and expenses over a
specific period. It helps organizations allocate resources, track financial performance, and
ensure that spending aligns with strategic goals and objectives.

[Link] about cost reduction and cost control.

Cost Reduction: Cost reduction refers to the process of reducing expenses within an
organization to improve profitability. It involves identifying areas where costs can be
minimized or eliminated without negatively impacting the quality of products or services.
Cost Control: Cost control focuses on managing costs within predetermined limits. It involves
setting standard, monitoring expenses, and implementing measures to keep costs within
predetermined limits. Cost control helps organizations to ensure that resources are used
efficiently.
Both cost reduction and cost control are important for organizations to achieve financial
stability. By reducing unnecessary expenses and implementing effective control measures,
businesses can reduce cost.
[Link] of financial and management accounting.
Basis Financial Accounting Management Accounting
Financial Accounting is the The accounting in which the both
process of recording revenues, financial and non-financial
Definition
expenses, assets and liabilities information are provided to
which are connected with running managers is known as
business. Management Accounting.
Users of Mainly used by the external parties Mainly used by the top level
Information of the business enterprise. management.
Focus on Historical perspective. Future emphasizes.
To provide accurate and reliable To provide accurate and reliable
Goal
financial information financial information
Must follow GAAP and Prescribed Need not follow GAAP or any
Requirements
formats. prescribe formats.
Period of time It is prepared for one year. It is prepared when required.
Concentration Concern about past events. Concern about future events.
Only financial aspects Both financial and non-financial
Reports
aspects
Publishing Required to be published and Not required to be published and
and auditing audited by statutory auditors. audited.

[Link] of cost and management accounting.

Basis of Comparison Cost Accounting Management Accounting
Meaning The recording, classifying The accounting in which the both
and summarizing of cost financial and non-financial
data of an organization is information are provided to managers
known as cost accounting. is known as Management Accounting.
Scope Concerned with Concerned with the effect aspect of
allocation, distribution of costs.
cost.
Objective Determine of cost of Providing information to managers to
production. set goals and strategies.
Recording Records past and present Associate with future projections.
data.
Planning Short term planning Short term and long term planning
Type of Information Quantitative. Quantitative and Qualitative
Specific Procedure Yes No
Interdependency Can be installed without Cannot be installed without cost
management accounting. accounting.
[Link] are the objectives or purpose or importance of management accounting?
The primary object of Management Accounting is to present the accounting information to the
management. However, the specific objectives are:
1. To assist in Planning: Management Accounting assists the management in planning as
well as making forecasts about the production, selling, inflow and outflow of cash etc.
2. To assist in Organizing: By preparing budgets, segregation of duties and proper
utilization of all resources a manager can organize the enterprise.
3. To formulate Policies: It helps the management to formulate relevant laws, rules and
regulations.
4. To assist in Motivating: By setting monetary and non-monetary incentives a manager
can motivate employee.
5. To Co-ordinate: It helps the management in coordinating the activities of different
departments.
6. To Control: The actual work done can be compared with Standards to enable the
management to control the performances effectively.
7. To Communicate: It helps the management in communicating the financial inform
about the enterprise. For taking decisions as well as for evaluating business
performances.
8. Miscellaneous:
 To provide necessary help while evaluating the efficiency and effectiveness.
 To provide necessary help in locating uneconomic place of business activities.
 To provide necessary help in solving business problems.

[Link] are the scope or function of management accounting?

1. Forecasting and Planning: The first and foremost function of management accounting
is to take short-term and long-term forecasts and planning. The management accountant
provides necessary information and data for forecasting.
2. Organizing: Organizing of human and non-human resources of the business is the
second function of management.
3. Communicating: Management accounting is an important medium of communication.
The reposting mechanism is a typical example of communicating.
4. Coordinating: Co-ordination is the essence of managerial activity. It increases the
efficiency of organization and maximizes its profits. The management accounting
provides the different tool of co ordination, for example, budgeting, financial reporting,
financial analysis and interpretation, etc.
5. Controlling: The management accounting is very helpful in controlling the financial
performance of the organization. The standard costing helps in cost control while
budgetary control techniques helps in departmental control of the organization.
6. Financial Analysis and Interpretation: The interpretation of financial data is a
technical job. The management accounting performs this technical service. It selects
useful data from the financial records, analyses it.
7. Other Functions of Management Accounting.
 It supplies useful information to different functional Authorities.
 It provides necessary accounting information and advice for price determination and
pricing decisions.
 It also helps in making certain strategic decisions.
[Link] of Management Accounting?
1. Selective Nature: Management accounting selects only few information out of much
information provided by the financial accounting system.
2. More Emphasis on Future: The management accounting attempts to highlight upon
what should have been.
3. Provides only information but no decision: The financial accounting information is
presented in the different basis and different manner which helps the management for
proper planning and take quality decisions.
4. Not follow the Rules of Financial Accounting: Management accounting never follows
the rules of financial accounting. But, it is concerned with the information which are
highly useful to the management for decision making and control purposes.
5. Not follow the GAAP: Management accounting never follows the standard of GAAP.
6. Recognition of Non-monetary Variables: Non-monetary variables such as efficiency
of employees, labor turnover, policy of management, organization culture, market
conditions and customer behavior are taken into account before taking a decision.
7. No Specific Rules: There is no such rules to the management accounting. Moreover,
the tools and techniques applied by the management are varying from one period to
another and one concern to another.
8. Improving Efficiency: The management can fix the target for each department through
budgetary control system. The actual performance is compared with that of targets.

[Link] are the technique of management accounting?

In order to discharge all functions like planning, organizing, staffing, direction and control
properly and efficiently the Management Accountant follow some techniques. They are-
1. Financial Planning: In order to achieve the primary objectives of a business enterprise,
financial planning helps to determine the financial activities which are necessary.
2. Historical Cost: It provides financial past data relating to cost of each job, processes
and departments etc.
3. Marginal Costing: Marginal Costing helps in the management accountant to take
decisions about cost control and profit maximization.
4. Standard Costing: Standard cost are pre-determined cost to manufacture a single unit
of a product.
5. Budgetary Control: Budgetary control is a system of controlling and planning cost. So
this technique is widely used in Management Accounting for planning mid controlling
6. Cash Flow Analysis: This statement disclose the analytical information about the uses
of cash in different sources and operating activities in an accounting cycle.
7. Statistical Analysis: Statistical data are widely used in Management Accounting for the
purpose making more meaningful future guidance, comparative studies etc.
8. Reporting Communicating: It helps to communicate desired financial information
through reports to the users of financial statement by which the management can take
right decision at right time.
[Link] of ethical conduct for management accountants.
There are 4 broad areas of ethical responsibility. They are-
1. Competence: Competence refers to having the necessary knowledge, skills, and abilities
to perform. When someone is competent, they can confidently and successfully carry
out their responsibilities and achieve desired outcomes. Management accountants
maintain a high level of professional competence.
2. Confidentiality: Confidentiality refers to the practice of keeping sensitive information
private and secure. Management accountants must treat sensitive matters with
confidentiality. They do not use confidential information for personal advantages.
3. Integrity: Integrity encompasses honesty, trustworthiness, and adherence to strong
moral and ethical principles. Management accountants must be maintain personal
integrity.
4. Credibility: Management accountants communicate information fairly and objectively.
Disclose all information that might be useful to management.

[Link] is Strategic Management?

Strategic management is like being the captain of a ship, making decisions to steer the
organization towards its long-term goals. It involves analyzing the internal and external factors
that can affect a company's success. Strategic management includes setting objectives,
formulating plans, implementing actions, and evaluating results. It concerned with establishing
long term goals and then ensuring that they are implemented effectively. The strategic
management process may be involving five steps, is described below.
1. Establish mission, vision and objectives;
2. Undertake a position analysis;
3. Identify and assess the strategic options;
4. Select strategic options and formulate plans;
5. Perform, review and control;

[Link] are the changing business environment?

1. Product Life Cycle; 5. Just-in-time production;
2. The Value Chain; 6. Total Quality Management;
3. Process reengineering; 7. Six Sigma;
4. Lean Manufacturing; 8. Theory of constraints and E-commerce;
Business environment changes in the past twenty years. The changing of business environment
are given bellow:
1. Product Life Cycle: Product life cycle refers to the various stages through which a product
passes product development, introduction into the market, maturation of the market, and
finally, withdrawal from the market. At each stage, managers face differing costs and
potential returns. Accounting system track actual costs and revenues throughout the entire
life cycle of the product.
2. The Value Chain: The value chain is the set of business functions that add value to the
products or services of an organization. The customer's needs are most effectively met by
coordinating the business processes. These functions include:
A. Research And Development: The generation of and experimentation with ideas related
to new products, services, or processes.
 B. Design of Products, Services, Or Processes: The detailed design and engineering of
products, services, or processes.
C. Production: The coordination and assembly of resources to produce a product or deliver
a service.
D. Marketing: The manner by which individuals or groups learn about the value and
features of products or services.
E. Distribution: The mechanism by which a company delivers products or services to the
customer.
F. Customer Service: The support activities provided to the customer.
G. Support Functions: The support activities provided by other internal business
functions. For example, management information systems, accounting information
systems.
3. Business Process Reengineering: Business process is a diagrammed in detail. Every step
of business process must be justified. The process is redesigned to eliminate all non-value-
added activities. There are some other objectives to reengineering-
A. Process is simplified. C. Costs are reduced.
B. Process is completed in less time. D. Opportunities for errors are reduced.
4. Lean Manufacturing: Lean manufacturing refers to the continuous process improvements
to eliminate waste to improve efficiency. It contain 5 step management approach that
organizes resources and the result is lower inventories, fewer defects, less wasted, and
quicker customer response times. The five stages of the lean thinking model:
A. Step-1: The first step is to identify the value that customers want in a specific products
and services.
B. Step-2: The second step is to identify the business process that delivers this value to
customers.
C. Step-3: The third step is to organize work arrangements around the flow of the business
process.
D. Step-4: The fourth step is to create a pull system where production will not initiate until
customer order. Under pull system, a company purchase enough materials each day to
meet that day's needs. Moreover, the company have no goods in process at the end of
the day, and all goods completed during the day would be shipped immediately to
customers.
E. Step-5: The fifth step is to continuously pursue perfection in the business process. In a
Lean Production system, the suppliers are responsible for the quality of raw-materials.
And company's production workers are directly responsible for spotting defective units.
A worker who discovers a defect, immediately stops the flow of production. Than
supervisors go to the cell to determine the cause of the problem and correct it before any
further defective units are produced. This procedure ensures that problems are quickly
identified and corrected.
5. Just-in-Time (JIT) Systems: Just-in-Time production systems focus on producing and
delivering products exactly when they are needed, without any excess inventory. It helps
minimize waste and improve efficiency in the production process. The process are-
A. Receive customer orders.
B. Schedule of production.
C. Receive raw-materials just in time for production.
D. Complete parts just in time for assembly into products.
E. Complete products just in time to ship customers.
The consequences or benefits of just in time Production System.
 Improved plant layout;  Flexible workforce;
 Higher quality products;  Reduced setup time;
 Rapid response to customer orders;  Reduced inventory costs;
 Greater customer satisfaction;  Zero production defects;
6. Total Quality Management: TQM is an approach that focuses on continuous improvement
and ensuring customer satisfaction. It involves all members of an organization working
together to achieve high-quality products and services. TQM emphasizes the importance
of quality at every stage of the production process.
7. Six Sigma: Six Sigma is a continuous process improvement to reduce costs by improving
quality. Six Sigma ensures that internal processes are running efficiently as much as
possible. It focuses on achieving near-perfect quality by using statistical analysis and
problem-solving techniques. The rate of defects in Six Sigma is low, sometimes zero
defects. It's a powerful tool for process improvement and quality management.
8. Theory of Constraints and E-Commerce: The Theory of Constraints is a management
philosophy that aims to identify and overcome bottlenecks or constraints in a system to
improve overall efficiency. It focusing on the most critical areas that limit productivity and
finding solutions to optimize those constraints.
E-Commerce: E-commerce is a booming industry that allows people to buy and sell products
and services in online. The growth in e-commerce is occur due to the internet.

14. How can process reengineering undermine employee morale? (3-20, 19)
Process reengineering can sometimes undermine employee morale if not implemented
properly. Here are a few ways it can happen:
 Lack of Involvement: When employees are not involved in the reengineering process,
they may feel excluded and undervalued. So it's important to include them in decision-
making.
 Job Insecurity: Process reengineering often involves changes in roles, responsibilities,
and even job cuts. This can create a sense of uncertainty and fear among employees
about their future within the organization.
 Increased Workload: During the transition period, employees may have to take on
additional tasks due to process changes. If the workload is high without proper support
or training, it can lead to stress and decreased morale.
 Resistance to Change: Some employees may be resistant to change, if they perceive it
is a threat to their job security or feel that their expertise is being disregarded. This
resistance can create a negative atmosphere and impact morale.
To mitigate these issues, it's important for organizations to communicate transparently, involve
employees in the process and provide necessary support and training to the employee.

16. "Management Accounting is Accounting of Effective management" Explain.

Management accounting measures, analyzes, and reports financial and nonfinancial
information to internal managers. The goal is to use past performance to predict the future.
The reports should also show how activities can be changed to affect and improve.
Management accountants reorganize and analyze financial and non-financial data using
rigorous methods. This methods support managers in their efforts that will improve future
financial success.
17. How does management accounting help in effective decision making?
OR, explain the role of management accountant in the management process? (20, 19,)
Management accounting play a vital role in the organization for making decision. For Effective
Decision making management accounting follow some process. Such as:
 Firstly, identify the problem and uncertainties.
 Secondly, obtain information. Decisions cannot be reasonably made without relevant
and reliable information.
 Thirdly, make predictions about the future. On the basis of obtained information,
manager can improve their predictions about the future.
 Fourthly, decide on one of the available alternatives.
 Finally, Implement the decision, evaluate performance.
By this Management accounting help in effective decision making.

18. Understanding the globalization and its consequences.

The world has become much more intertwined over the last 20 years. Reductions in tariffs,
quotas, and other barriers to free trade; improvements in global transportation systems; and
increasing sophistication in international markets have created a truly global marketplace.
In a global marketplace, a company that has been very successful in its local market may
suddenly find itself facing competition from globe. Although globalization leads to greater
competition, it also means greater access to new markets, customers, and workers.
For example, the emerging markets of China, India, Russia, and Brazil contain more than 2.5
billion potential customers and workers.

19. What will be the role of in accountant under a TQM environment? (3-20, 19)
20. Discuss the basic principles of Management accounting. (3-19)
#NOTE:

Md. Mehedi Hasan Sikder

Department of Accounting and Information Systems
Roll: B1904003
Session: 2019-2020
E-mail: iumehedi@[Link]
[Link]@[Link]
Islamic University, Kushtia, Bangladesh.