Management Accounting

Paperback | December 19, 2012

byR. C. Sekhar, A. V. Rajagopalan

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Management Accounting is a comprehensive textbook that is specially designed to meet the needs of management students. It explores core concepts of management accounting through managerial applications and supplements them through numerous solved problems and detailed case studies. The exposition provides in-depth coverage of the four key components of management accounting from an Indian perspective: management accounting fundamentals, tools for management accounting, management accounting in decision making, and management control systems. Among the important topicsdiscussed are financial accounting and financial statement analysis, cost-profit-volume analysis, activity-based costing, costing in inventory valuation, costing for pricing, management control systems, responsibility accounting and budgeting, job and process costing, balanced score card andstrategic costing, and ethics in managerial accounting. Users will find this book highly useful for its coverage of the key concepts of management accounting explained through solved problems, small cases, tables, flow charts, and diagrams.

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Management Accounting is a comprehensive textbook that is specially designed to meet the needs of management students. It explores core concepts of management accounting through managerial applications and supplements them through numerous solved problems and detailed case studies. The exposition provides in-depth coverage of the four ...

R. C. Sekhar was Professor Emeritus at T A Pai Institute of Management, Manipal, with over fifteen years of teaching experience in management and cost accounting at the postgraduate level. He was also a visiting faculty at the Indian Institute of Management, Ahmedabad; XLRI, Jamshedpur, and MDI, Gurgaon. Besides contributing important...

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Format:PaperbackDimensions:664 pagesPublished:December 19, 2012Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0195683609

ISBN - 13:9780195683608

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Table of Contents

PART - I: MANAGEMENT ACCOUNTING FUNDAMENTALS1. Introduction to Managerial AccountingIntroductionThe users of accounting systems and accounting informationRoles of an AccountantAccountants as Attention Directors, Problem solvers, and ScorekeepersIjiri's Accountee-Accounter-Accountant ModelPacioli's double-entry bookkeeping and accounting systemsThe Essence of Financial AccountingCost AccountingCost Audit Regulations in IndiaPublic Regulations to Control Cost AccountantsManagement AccountingThe Accountant in the Organizational StructureA Day in the Life of a Management AccountantAttitudes Towards Accounting SystemsManagers and Accounting SystemsA Comparative Survey of National Attitudes towards AccountingManagement Accounting in Developing CountriesStatutory Controls on AccountingMoral and Ethical Imperative of AccountantsCost of AccountingCase Study 1: Cost Benefit of the Kaup Power PlantCase Study 2: Excellent Engineering: Submersible Pump Division2. Financial Accounting and Financial Statement AnalysisIntroductionBasic Concepts in Financial AccountingThe Entity ConceptThe Duality ConceptAccounting EquationThe Meaning of Debit and CreditMoney Measurement ConceptThe Cost ConceptThe Going Concern ConceptPeriodicity ConceptAccrual ConceptThe Matching ConceptThe Concept of Prudence or ConservatismThe Realization ConceptMateriality ConceptSystematic Documentation of TransactionsColumnar Sales Day Books, Purchase Day Books, Cash Books, and Bank BooksT Accounts, General Ledgers, Subsidiary Ledgers, and Group LedgersTrial BalancePeriodic Adjustments in AccountsThe Practical Application of ConceptsFinancial Statement AnalysisCash Flow and Fund Flow Statements-Accounting Standard of the Institute of Chartered Accountants of IndiaFinancial Ratio Analysis Through Standard RatiosLiquidity Analysis RatiosProfitability Analysis Ratios Activity Analysis RatiosCapital Structure AnalysisCapital Market RatiosDiscernment AnalysisAccounting StandardsThe Accounting Origins of the Enron, WorldCom, Parmalat, and Tata Finance FraudsCase Study 1: Kamath's Student MessCase Study 2: Jyoti Prakash Highway Restaurant3. Terminology of CostingIntroductionNatural Descriptive Classification and Functional Classification Cost ObjectsResponsibility CentresClassification of Costs According to Behaviour Towards Drivers and Over a RangeControllable Costs and Uncontrollable CostsDirect and Indirect CostsPrime Costs, out of Pocket, and Conversion CostsUnit Cost and Average CostCost of Goods SoldCost of Goods ManufacturedWork-in-processPeriod Costs and Product CostsDifferent Costs for Different PurposesA Framework for Cost Management with Emphasis on StrategyCase Study 1: Bansiram BhujiasCase Study 2: Matsyaraja Moulded BoatsPART - II: TOOLS FOR MANAGEMENT ACCOUNTING4. Cost-Volume-Profit AnalysisIntroductionChanges in Costs and Profits with Changes in VolumeWhy do Cost Per Unit and Revenue Per Unit Change with Volume?Changes in Total Profits with Change in VolumeBreak-even AnalysisMethods of Break-even AnalysisLimitations of Break-even AnalysisBreak-even Analysis and CVP Analysis For Multiple ProductsPlanning for Target IncomeAdjusting Plan for Taxation'What If' and Sensitivity Analysis Using ComputersMeasures of RiskMargin of SafetyOperating LeverageRisk Sharing and CVP AnalysisChanging Time Horizon for AnalysisDecision OptionsCost-volume Analysis for Non-profit OrganizationsUsing Multiple Cost DriversDecisions on Advertising PlansDecisions in Raising or Reducing Sale PricesPresentation of Profit in the Contribution FormatCase Study 1: Gummidipundi Sintered ProductsCase Study 2: Franchising Money Order Business5. Job and Process CostingIntroductionJob Costing vs Process CostingCost Flows in a Manufacturing Job Costing SystemCosting of Products and ProcessesSteps in Cost AscertainmentSource DocumentsNormal CostingAccounting Mechanics of Normal CostingNon-manufacturing Costs And Job CostingMultiple Overhead Cost PoolsNegotiated or Administered Prices and Costplus ContractsBatch CostingContract and Project CostingProcess CostingCost FlowEquivalent Units of ProductionCost Sheet 187Process LossAbnormal LossInter Process ProfitSimple Overhead AllocationCase Study 1: Poornima BiotechCase Study 2: Bonda Earthmover RepairsCase Study 3: Prakash Computer HardwareCase Study 4: Siva EnterprisesCase Study 5: The Ethical Dilemma6. Activity-based CostingIntroductionABC-An Extension of Indirect CostsABC and the Seven Steps in Cost AscertainmentNormal Costing and ABCProblems of Measurement of Activities in ABCUse of Work Sampling in ABCGPK-The German Costing and Flexible Manufacturing SystemsAccounting Mechanics and ABCABC and Cost-volume-profit AnalysisABC Hierarchy of CostsAbc In Service And Merchandising SectorsActivity-Based Costing with Two ActivitiesImpact of These Different Allocation Techniques and Overhead Rates on the Per Unit CostOther Uses of ABCABC and ControlsABC and Product Mix DecisionsWhen to and When not to use ABC7. Responsibility Accounting and BudgetingIntroductionResponsibility AccountingAccountability in OrganizationsResponsibility CentresTypes of Responsibility CentresHierarchy of Responsibility CentresResponsibility Centre ReportEffective Responsibility AccountingThe Four Levers of ControlParticipative BudgetsStrategy and its Relation to BudgetsThe Budgeting ProcessThe Budgeting CycleKey Factors in Budget MakingAdministrative Machinery for BudgetsStructure and Content of BudgetsBudgeting For Discretionary Costs and Engineered CostsABC and BudgetingResponsibility and ControllabilityIncremental, Kaizen, and Zero-based BudgetsLoose Budget and Slack BudgetBehavioural Problems in Budgets8. Flexible Budgets and Variance AnalysisIntroductionRelationship Between Actual Cost and Standard CostVariances Relating to Direct LabourDefinition of Standard CostingComparative Analysis of Variations of Actual Profits from BudgetsFactors that Deviate from the Budgets and Isolate the Variances for Responsibility CentresCause for Deviation from Budget-Sales and Second Level Analysis of VariancesThe Third Level Analysis of VariancesSales MixThe General Problem of Sharing of Common VarianceThe Varied Meaning of OverheadsEfficiency Variance due to Change in Batch Size in Actual and BudgetProduction Volume Variance, Fixed Spending Variance, and Capacity UtilizationFormulae for Calculating Variance Analysis-A Memory AidInvestigating a VarianceComparison of Normal Costing and Standard CostingDifference between Budgetary Control and Control through Standard CostingVariance Analysis and Inventory ValuationThe Tediousness and Paperwork Involved in Variance AnalysisKeeping All Accounts at Standards and Reducing Work of AccountingABC Analysis, Standard Costing, and Variance AnalysisLimitations of Standard Costing and Its Negative Impact Behaviour9. Developing Standard Costs and Their Use in Pricing and Estimations for Contract BidsIntroductionStandard Costing For PricingStandard Cost in Public Services and BiddingProcesses of Standard SettingUsing Past Internal Data and Internal BenchmarkingFocus Groups and Participative ProcessesIndustrial EngineeringWorking Back to Target Costs from Target Prices and Using Value EngineeringExternal BenchmarkingUsing Secondary Data for BenchmarkingCompetitive Benchmarking and ExternalitiesLearning CurveElement of Strategic Innovations10. Cost Information for Inventory Valuation and Inventory ManagementIntroductionValuation of InventoriesActual Cost OptionsStandard CostNormal CostingItems to be Included in the Inventory CostsPeriodicity of Inventory ValuationIncome Tax ProvisionsImplications of Categories of Costs Included in Inventory ValuationImpact of Inventory Accounting on PricingHow Much Stocks should One have and When?Functional Classification of InventoriesCycle InventoriesSafety StockAnticipation InventoryPipeline InventoryEconomic Order and Batch QuantityCost of Errors in EstimationRadical Transformation of the Cost StructureCounting on Discounts for Bulk PurchasesWhen to Buy and ManufactureWhen to Order with Uncertain Demand and Supply PatternEconomic Batch QuantityPractical Difficulties in Ordering only at the Reorder Point with an EOQ ModelConverting Imputed Costs of Interest to Real CostThe Budgetary Process and its Divergence from Economic Ordering for InventoriesABC, XYZ, VED, and FSN analysis of inventoryIllustration of ABC AnalysisJust In Time ConceptAccounting Modification to Match JITThroughput CostingBack Flush CostingSupply Chain ManagementMaterial Resource Planning as a ToolEconomic Resource Planning as a ToolProject Work11. Decision-making and Relevant CostingIntroductionIntroductionSpecial Cost Terminology of Relevant CostsDetermining Relevant Revenues and Relevant Costs for Electric EquipmentsVariety of Algorithms Used in Relevant Cost AnalysisSpecial One-Time OrdersReplacement of Machines and Dealing with Historical CostsTiming of Introduction of a New Product and Dropping off of an Existing ProductMake or Buy, and the Economics of OutsourcingProduct Mix and Allotment of Product to Scarce ResourcesClosing Down and Opening Segments of an OrganizationDropping off and Adding a Class of CustomersTheory of ConstraintsAmbushing the Constraints12. Capturing the Complex Behaviour of CostsIntroductionBasic Objective of Developing Cost FunctionsCost ClassificationChoice of Cost Objects and Related Cost/Revenue DriversInternational Variations in Classificatory PracticesTime Horizon 441; Relevant RangeCost Estimation MethodsSix Steps to Building a Cost Function Using Quantitative MethodsEvaluating Cost DriversThe Relative Strength of Alternative Cost DriversCost Drivers, ABC, and Estimates of OverheadsHandling Non-linearityUse of Actual Cost Data to Decide Parameters of Learning CurveData CollectionUnderstanding Macro-level and Public Policy Implications of Cost BehaviourCoping Up With Imperfect DataCase of Decision Dilemma at Hearty Foods Ltd13. Costing for Pricing DecisionsIntroductionModerating Adam Smith's Invisible HandThree C's of PricingPricing objectivesWho Decides the Prices?Role of the Three C's in Varied Pricing StrategiesLife Cycle CostingDefinitionLimitationsTarget Costing, Locked-in Costs, and Pricing RevisitedYield Management-A New Concept in Pricing Non-inventoriable ProductsApplication of Yield Algorithm in hotel industryApplication to AirlinesApplication to Mother Dairy Vegetable and Fruit ShopLaws and Government Regulations which hem Pricing OptionsCHAPTER II of Competition Act 2002* Prohibition of Certain Agreements, Abuse of Dominant Position and Regulation of CombinationsThe Essence Emerging from These Extracts of LawPART - III: MANAGEMENT ACCOUNTING FOR DECISION-MAKING14. Professional Ethics and Behavioural IssuesIntroductionIntegrity in a competitive worldTechnical StandardsProfessional StandardsBehavioural/Ethical StandardsThe Indian code of ethics for cost accountantsEthics and Social ResponsibilityInstitute of Management Accountants (IMA) of the USCompetenceConfidentialityIntegrityCredibilityManaging ConflictBehavioural issues and the management accountantBehavioural issues and employee moraleNot a 'sweet' DilemmaPART - IV: MANAGEMENT CONTROL SYSTEMS15. Management Control SystemsSingle focus and dual focusThe human impact on controlThe Rationality IssueThe Ethical Issue Organizational TensionsSelf-defeating ControlsFormal and informal controlsLevers of ControlDiagnostic SystemsInteractive Control SystemsInteractive Controls in a Dairy CompanyInteractive Controls in Snacks OutletsBoundary Control SystemsBelief Control SystemsTraditional ControlsCultural and Ethical ControlsEffective and Efficient ControlsShifts in Control SystemsExternal FactorsInternal FactorsDegree of ControlsControl OptimizationControl FailurePerformance MeasuresCosts of ControlMyths of accountability and controls16. Balanced ScorecardStrategyStrategy MapsRelevance of the ScorecardsCharacteristics of the ScorecardInternal Business Processes PerspectiveCustomer PerspectiveThe Learning and Growth PerspectiveFinancial PerspectiveModel ScorecardNumber of ScorecardsWeightage of the ScorecardsBalancing the Balanced ScorecardThe Cause-and-effect RelationshipsBarriers to SuccessThe Cost of Implementing Balanced ScorecardGovernment and non-profit OrganizationsThe ten commandments for successful implementation of BSCBudgets and the Balanced ScorecardPART - V: APPENDICESAppendix 1: E-budgetingHow E-budgeting WorksBenefits of E-budgetingShortcomings of E-budgetingAppendix 2: Cost AuditLandmarks in the Development of Cost AuditThe Legal ProvisionsDefinition Expanding the ScopeRationale for Cost AuditThe Healthy CostScope of Cost AuditCosting in Essential ServicesThe Cost AuditorAppendix 3: Cost Accounting StandardsPreparation of CASAppendix 4: Costing in Government and Not-for-profit OrganizationsCosting in GovernmentCost Accounting in Not-for-profit OrganizationsThe Need for Cost Accounting in Not-for-profit Organizations