1. Module 1 Managerial AccountingManagerial Accounting - Dr. Varadraj Bapat

2. Dr. Varadraj Bapat Chartered Accountant Cost Accountant Ph.D., IIT B, Powai, MumbaiContact Information:varadraj@som.iitb.ac.inManagerial Accounting - Dr. Varadraj Bapat 3. LEARNING OBJECTIVES Need to Know About Accounting Managerial Accounting Financial Statements - Balance Sheet,Income StatementManagerial Accounting - Dr. Varadraj Bapat 4. Need to Know About Accounting Need to Know About Accounting andFinanceManagerial Accounting - Dr. Varadraj Bapat 5. Why do I need to learn about finance I am very good in my own area of specialization How would you react to the above statement?Managerial Accounting - Dr. Varadraj Bapat 6. The job content Management As& Finance you Expertise mo ve up ..Functional ExpertiseManagerial Accounting - Dr. Varadraj Bapat 7. About Managerial Accounting What is Accounting? Financial Accounting, Cost Accounting andManagement Accounting Financial Accounting and FinancialManagement Finance and complexity of organisationManagerial Accounting - Dr. Varadraj Bapat 8. Accounting Languageof Business Performance is reported andevaluated in financial terms Knowledgeis useful forpersonal investment and taxplanning as wellManagerial Accounting - Dr. Varadraj Bapat 9. Accounting It is not necessary to becomeaccountant But its very useful if every oneunderstands the accountingand financial concepts andterminology properlyManagerial Accounting - Dr. Varadraj Bapat 10. Need to Learn Accounting Itassists in management Will help in planning,organisation and control ofbusiness Leads to increase in efficiency ofbusiness Profit maximizationManagerial Accounting - Dr. Varadraj Bapat 11. Streams of Accounting FinancialAccounting,CostAccounting and ManagementAccounting Let usunderstand thesimilarities and difference inthese three streams ofaccountingManagerial Accounting - Dr. Varadraj Bapat 12. Financial Accounting Recording of FinancialTransactions Reporting of Financial Results Preparation of FinancialStatements Targeted to External UsersManagerial Accounting - Dr. Varadraj Bapat 13. Cost Accounting Recording of Costs Analysis of Costs Preparation of CostStatements Targeted to Internal UsersManagerial Accounting - Dr. Varadraj Bapat 14. Management Accounting Recording of Financial & otherdata Analysis of Financial and otherinformation Preparation of Statements forManagerial DecisionsManagerial Accounting - Dr. Varadraj Bapat 15. Management Accounting Targeted to Internal Users -All levels of Management This is a broader conceptencompasses Financial andCost AccountingManagerial Accounting - Dr. Varadraj Bapat 16. Meaning of Management Accounting Any form of accounting whichenables a business to beconducted more efficiently canbe regarded as ManagementAccounting.(InstituteofChartered Accountants of India-ICAI) Management Accounting is theManagerial Accounting - Dr. Varadraj Bapat 17. applicationofprofessionalknowledgeandskill inthepreparationof accountinginformation in such a way as toassist management in the formationof policies and in the planning andcontrol of operations of undertaking.(InternationalCapital MarketAssociation, London- ICMA)Managerial Accounting - Dr. Varadraj Bapat 18. Financial Management Financial Accounting, ManagerialAccountingand FinancialManagement: Relationship Financial Management deals withraising and utilization of funds Raising of funds may includeCost of Capital, Capital StructureManagerial Accounting - Dr. Varadraj Bapat 19. Financial Managementdecisions, Capital Markets, IPOsand so on Financial Management deals withraising and utilization of funds Utilization of funds may includeCapital Budgeting,PortfolioManagement, Working CapitalManagement and so onManagerial Accounting - Dr. Varadraj Bapat 20. Managerial V/s FinancialAccounting Accounting System(accumulates allaccounting data) Managerial Accounting Financial AccountingInformation for decisionPublished financialmaking, and controlstatements and otherof an organizations financial reports.operations.Internal External UsersUsersManagerial Accounting - Dr. Varadraj Bapat 21. Complexity of Organisation Financeand complexity oforganisation As the organizations grow, theybecome complex Ownership and Management areseparatedManagerial Accounting - Dr. Varadraj Bapat 22. Complexity of Organisation Ownershipis widespread This increases the importance ofFinance functionManagerial Accounting - Dr. Varadraj Bapat 23. About this course Managerial Accounting Course The course will cover FinancialAccounting, Cost Accountingand Management Accounting Financial Management is dealtin a different courseManagerial Accounting - Dr. Varadraj Bapat 24. Financial Statements What are they? Which are important FinancialStatements? What purposes do they serve?Managerial Accounting - Dr. Varadraj Bapat 25. Company or OrganisationPROVIDERSRESOURCES OF FORMONEY BUSINESSThese two are always equalManagerial Accounting - Dr. Varadraj Bapat 26. The Basic Business Model InfrastructureTheMoney MoneyCollection CycleProcurementBillingValueConsumption AdditionDeliveryCycle PeopleManagerial Accounting - Dr. Varadraj Bapat 27. InfrastructureMoney Collection CostsProcurement Billing ConsumptionDeliveryTo be profitable, our revenue should be more thanour cost ! This would make the organisationstronger, healthy and long-lasting.Managerial Accounting - Dr. Varadraj Bapat 28. Balance SheetProfit & Loss Account Liabilities Assets Infrastructure RevenueCapital Costs Fixed Assets MoneyBorrowings from CollectionBanks / FIs Current Assets Procurementor Working Outstanding Current & InventoryCapital Liabilities ConsumptionProfit/ LossDelivery & & WIP Human Assets BillingPeopleBalance Sheet shows the financial position oforganisation, while Profit & loss Account showsthe profitability of organisation. Managerial Accounting - Dr. Varadraj Bapat 29. BalanceSheetshowsthecumulative position of resources(assets) and sources of funds(liabilities) at the end of the year.Profit & Loss Account showsRevenue& Costperformanceduring a quarter/ year.Managerial Accounting - Dr. Varadraj Bapat 30. Balance Sheet Profit & Loss AccountLiabilitiesAssetsInfrastructure RevenueCapitalCosts ReservesFixed Assets MoneyBorrowingsCollection(eg.from Banks) Current AssetsorWorkingProcurement Outstanding CurrentCapital& Inventory Liabilities ConsumptionProfitDelivery & & WIPHuman AssetsBillingPeople Profits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing. Managerial Accounting - Dr. Varadraj Bapat 31. Balance SheetProfit & Loss AccountLiabilitiesAssetsInfrastructure RevenueCapitalCosts Fixed Assets Reserves MoneyBorrowingsCollectionCurrent Assets(eg.from Banks)orWorkingProcurementCapitalOutstanding Current & InventoryLiabilities ConsumptionProfitDelivery & Human Assets& WIPBillingPeopleProfits build up reserves & enable an enterprise to acquirenew assets without borrowing money. Exactly the way wecan acquire assets for our use without borrowing. Managerial Accounting - Dr. Varadraj Bapat 32. Balancesheet may be preparedat any time showing the positionas on that date. Profit and loss account may beprepared for any particularperiod.Managerial Accounting - Dr. Varadraj Bapat 33. Balance Sheet Owners Funds Fixed Assets Non Current Non CurrentliabilitiesInvestments Current Other nonliabilitiescurrent assets Current AssetsManagerial Accounting - Dr. Varadraj Bapat 34. The Annual Report Usually Contains ... financial statements which consistof Balance sheet, Profit & Loss A/c Cash Flow Statements notes to the financial statements disclosure of accounting policiesManagerial Accounting - Dr. Varadraj Bapat 35. The Annual Report Usually Contains ... - Chairmans Statement - Board of Directors & Committees - Directors Report - Directors Responsibility Statement - Auditors Report - Report on Corporate GovernanceManagerial Accounting - Dr. Varadraj Bapat 36. The Annual Report Usually Contains ... - Disclosure regarding Employee Stock options Schemes - List ofemployeesreceiving remuneration exceeding Rs. 60 Lakhs - Conservation of Energy ReportsManagerial Accounting - Dr. Varadraj Bapat 37. The Annual Report Usually Contains ... - Consolidated Financial Statements - Subsidiaries Financial Statements - Management Discussion and Analysis - Annual General Meeting NoticeManagerial Accounting - Dr. Varadraj Bapat