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Management Accounting for University of Delhi PDF

384 Pages·2011·4.078 MB·English
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ManageMent accounting This page is intentionally left blank. ManageMent accounting For university of Delhi as per the syllabus of B.com (Hons.) course Debarshi Bhattacharyya Assistant Professor S. R. Fatepuria College University of Kalyani, West Bengal Lata Sharma Associate Professor Lakshmibai College University of Delhi Delhi • Chennai • Chandigarh Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd Licensees of Pearson Education in South Asia No part of this eBook may be used or reproduced in any manner whatsoever without the publisher’s prior written consent. This eBook may or may not include all assets that were part of the print version. The publisher reserves the right to remove any material present in this eBook at any time. ISBN 9788131754504 eISBN 9789332510753 Head Office: A-8(A), Sector 62, Knowledge Boulevard, 7th Floor, NOIDA 201 309, India Registered Office: 11 Local Shopping Centre, Panchsheel Park, New Delhi 110 017, India Dedicated at the feet of my parents the late Dhurjati Prasad Bhattacharyya and the late Aparna Bhattacharyya, who are in front of me round the clock with their blessings. Debarshi Bhattacharyya Dedicated to my parents Professor R. A. Sharma and the late Pragya Sharma, who are my source of inspiration and strength. Lata Sharma This page is intentionally left blank. contents Preface xiii 1. Introduction to Management Accounting 1 1.1 Definition of Management Accounting 1 1.2 Nature or Features of Management Accounting 2 1.3 Scope of Management Accounting 2 1.4 Objectives of Management Accounting 4 1.5 Role or Functions of Management Accounting 5 1.6 Utility of Management Accounting 5 1.7 Limitations of Management Accounting 6 1.8 Tools and Techniques of Management Accounting 7 1.9 Requisites for Installation of Management Accounting System 8 1.10 How Does Management Accounting Differ from the other Branches of Accounting 8 1.10.1 Management Accounting and Financial Accounting 8 1.10.2 Management Accounting and Cost Accounting 9 1.11 Meaning of Cost Management 10 1.12 Advantages of Cost Management 10 1.13 Meaning of Cost Control 10 1.14 Procedure for Cost Control 10 1.15 Techniaues of Cost Control 11 1.16 Meaning of Cost Reduction 11 1.17 Features of Cost Reduction 11 1.18 Scope of Cost Reduction 11 1.19 Techniques of Cost Reduction 11 1.20 Cost Reduction vs Cost Control 12 1.21 Difference between Cost Management, Cost Control and Cost Reduction 12 Chapter Review Summary 12 • Chapter Review Quiz 14 • Exercise 15 2. Budget and Budgetary Control 16 2.1 Meaning of Budget 16 2.2 Meaning of Budgeting 16 2.3 Features of Budget 16 2.4 Forecast and Budget 17 2.5 Budgetary Control 17 2.6 Objectives of Budegetary Control 17 2.7 Advantages of Budgetary Control 17 2.8 Limitations of Budgetary Control 18 2.9 Comparison between Budget and Budgetary Control 18 viii ContentS 2.10 Comparison Between Standard Costing and Budgetary Control 18 2.11 Zero-Based Budgeting (ZBB) 19 2.11.1 Features of Zero-based Budgeting 19 2.11.2 Advantages of Zero-based Budgeting 19 2.11.3 Disadvantages of Zero-based Budgeting 19 2.12 Peroformance Budgeting 20 2.12.1 Steps in Performance Budgeting 20 2.13 Programme Budgeting 20 2.14 Budget Administration 20 2.15 Budget Reports 21 2.16 Revision of Budgets 21 2.17 Classification or Types of Budget 21 2.17.1 Classification on the Basis of Period 22 2.17.2 Classification on the Basis of Flexibility of Production 22 2.17.3 Classification on the Basis of Function or Coverage 22 2.18 Worked-Out Problems 25 Chapter Review Summary 78 • Chapter Review Quiz 80 • Exercise 80 3. Standard Costing and Variance Analysis 96 3.1 What is Standard Cost? 96 3.2 What is Standard Costing? 96 3.2.1 Features of Standard Costing 96 3.3 Preliminary Steps for Establishing Standard Costing System 97 3.4 Types of Standards 97 3.5 Distinction between Standard Ccost, Estimated Ccost and Actural/Historical Cost 97 3.6 Advantages of Standard Costing 97 3.7 Limitations of Standard Costing 98 3.8 Applications of Standard Costing 98 3.9 Comparison between Standard Costing and Budgetary Control 98 3.10 Analysis of Variance 99 3.10.1 Direction of Variances 99 3.10.2 Nature of Variances 99 3.10.3 Purposes of Variance Analysis 100 3.11 Classification of Variances 100 3.11.1 Material Variances 100 3.11.2 Labour Variances 102 3.11.3 Variable Overhead Variances 104 3.11.4 Fixed Overhead Variances 105 3.11.5 Sales Value Variances 107 3.11.6 Sales Margin (Profit) Variances 109 3.12 Disposition of Variances 110 ContentS ix 3.13 Control Ratios 111 3.14 Formulae of Various Variances at a Glance 111 3.15 Worked-Out Problems 117 Chapter Review Summary 164 • Chapter Review Quiz 165 • Exercise 166 4. Absorption Costing and Variable Costing 177 4.1 Absorption Costing 177 4.2 Features of Absorption Costing 177 4.3 Advantages of Absorption Costing 178 4.4 Limitations of Absorption Costing 178 4.5 Variable Costing 178 4.6 Features of Variable Costing 179 4.7 Advantages of Variable Costing 179 4.8 Limitations of Variable Costing 179 4.9 Incomes Determination under Absorption Costing and Variable Costing 180 4.9.1 Income determination under Absorption Costing technique 181 4.9.2 Income determination under Variable Costing technique 181 4.10 Distinction between Absorption Costing and Variable Costing 181 4.11 Worked-Out Problems 182 Chapter Review Summary 189 • Chapter Review Quiz 190 • Exercise 19 5. Marginal Costing and Cost–Volume–Profit Analysis 194 5.1 Concept of Marginal Cost 194 5.2 Definition of Marginal Costing 195 5.3 Features of Marginal Costing 195 5.4 Advantages of Marginal Costing 195 5.5 Limitations of Marginal Costing 196 5.6 Meaning of Cost–Volume–Profit (CVP) Analysis 196 5.7 Features of CVP Analysis 196 5.8 Objectives of CVP Analysis 197 5.9 Assumptions Underlying CVP Analysis 197 5.10 Classification of Cost Under CVP Analysis 197 5.11 Elements of CVP Analysis 197 5.12 Break-even Analysis (BE Analysis) 202 5.13 Cash Break-even Point 203 5.14 Composite Break-even Point 203 5.15 Cost Break-even Point/Cost Indifference Point 204 5.16 Break-even Chart (Be Chart) 204 5.16.1 Presentation of Be Chart 205 5.16.2 Analytical Break-even Chart 207 5.17 Angle of Incidence 207

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