Accounting For Management

Cover
Half Title
Author’s Profile
Title
Copyright
Dedication
Foreword
Preface
Acknowledgements
Contents
1. Management Accounting: An Overview
1.1 What is Accounting?
1.2 Bookkeeping vs. Accounting
1.3 Users of the Accounting System (Internal and External)
1.4 Different Types of Accounting Activities
Chapter at a Glance
Questions for Self-Assessment
2. Basic Concepts and Conventions; and Generally Accepted Accounting Principles
2.1 Rationale behind Basic Concepts and Conventions
2.2 Historical Perspective
2.3 Basic Concepts and Conventions
Chapter at a Glance
Questions for Self-Assessment
Appendix 2.1: International Financial Reporting Standards (IFRSs)
3. Financial Statements: A Brief Introduction
3.1 Management Accounting and Financial Management—A Comparison
3.2 Components of Financial Statements
3.3 Format of Balance Sheet
Chapter at a Glance
Questions for Self-Assessment
4. Balance Sheet: Some Terminologies
4.1 Liabilities (Sources of Funds)
4.2 Equity Share (Ordinary Share) Capital
4.3 Some Other Terminologies, Pertaining to the Share Capital
4.4 More Terminology
4.5 Preference Share Capital
4.6 Reserves and Surplus
4.7 Secured Loans
4.8 Equitable Mortgage
4.9 Unsecured Loans
4.10 Current Liabilities and Provisions
4.11 Assets (Uses or Application of Funds)
4.12 Fixed Assets
4.13 Investments
4.14 Current Assets
4.15 Miscellaneous Expenses and Losses
Chapter at a Glance
Questions for Self-Assessment
Problems
5. Profi t and Loss Account
5.1 Items Reported in Profi t and Loss Account
5.2 Terms Used in Profi t and Loss Account
5.3 Profi t and Loss Appropriation Account
5.4 Cash Profi t
Chapter at a Glance
Questions for Self-Assessment
6. Mechanics of Accounting: For Preparation of Financial Statements
6.1 Accounting Mechanism—Steps and Stages
6.2 ‘T’ Accounts: Ledger
6.3 Rules Pertaining to Recording of Business Transactions
6.4 Revenues and Expenses and Owners’ Equity Account
6.5 Balancing Mechanism for ‘T’ Accounts
6.6 Books of Original Entries
6.7 Trial Balance
Chapter at a Glance
Questions for Self-Assessment
Problems
7. Revenue Recognition and Measurement
7.1 Recognition of Revenue
7.2 Recognition at the Time of Sale
7.3 Recognition at the Time when the Sale Proceeds are Received
7.4 Recognition at the Time when the Product or Project is Completed
7.5 Proportionately, Spread Over the Period of Performance of Contracts
Chapter at a Glance
Questions for Self-Assessment
Problems
8. Matching of Revenues and Expenses
8.1 Different Categories of Stocks of Inventories
8.2 Different Categories of Manufacturing Costs
8.3 Computation of Manufacturing Costs
Chapter at a Glance
Questions for Self-Assessment
9. Inventory Pricing and Valuation
9.1 Issues Involved in Valuation of Inventories
9.2 Three Main Methods of Valuation of Inventories
9.3 Principles Pertaining to Valuation of Inventories
9.4 FIFO and LIFO Methods of Inventory Valuation: A Comparison
Chapter at a Glance
Questions for Self-Assessment
Problems
10. Fixed Assets and Depreciation Accounting
10.1 What Constitutes a Fixed Asset?
10.2 Capitalisation of Cost and Incidental Expenses
10.3 Disclosures
10.4 Depreciation
10.5 Confusion Relating to the Nature of Depreciation Expenses
10.6 Methods of Computing Depreciation
Chapter at a Glance
Questions for Self-Assessment
Problems
11. Intangible Assets
11.1 Classifi cation of Intangible Assets
11.2 Valuation of ‘Rights’ and ‘Acquired Goodwill’
11.3 Accounting Treatment of Research and Development Costs
Chapter at a Glance
Questions for Self-Assessment
12. Evaluation of Financial Performance Through Ratio Analysis Technique
12.1 Reclassifi cation of Assets and Liabilities
12.2 Computation of Ratios
12.3 Analysis and Interpretation of the Ratios
12.4 Evaluation of Financial Performance through Ratio Analysis Technique
Chapter at a Glance
Questions for Self-Assessment
13. Evaluation of Financial Performance Through Ratio Analysis Technique: Case Studies, with Suggested Approaches
Case Study 1: Majestic Motors Limited (MML)
Majestic Motors Limited (MML): A Suggested Approach to the Case Study
Case Study 2: Exim Corporation Limited (ECL)
Exim Corporation Limited (ECL): A Suggested Approach to the Case Study
14. Sources and Application (Uses) of Funds Statements: Analysis and Interpretation
14.1 What are the Sources and Application of Funds?
14.2 Why should We Exclude Cash?
Case Study 1: Swastik Synthetics Limited (SSL)
Case Study 2: Pilot Plies Limited (PPL)
Case Study 3: Woodcraft World Limited (WWL)
Chapter at a Glance
Questions for Self-Assessment
Problems
15. Auditing of Financial Statements: Some Legal Aspects
15.1 Rationale Behind Statutory Audit of the Financial Statements
15.2 Role and Responsibilities of the Auditors
15.3 Legal Provisions Pertaining to Auditors
15.4 Some Case Laws, Clarifying the Duties and Responsibilities of Auditors
15.5 Professional Ethics of Auditors
15.6 Roles and Responsibilities of Internal Auditors
Chapter at a Glance
Questions for Self-Assessment
Problems
16. Infl ation Accounting
16.1 Rationale Behind Infl ation Accounting
16.2 Historical Accounting vs. Infl ation Accounting
16.3 Effects of Infl ation on the Financial Statements
16.4 Objectives of Infl ation Accounting
16.5 Different Methods of Accounting and Infl ation Accounting
16.6 Concluding Remarks
16.7 Accounting Practices in Indian Context
Chapter at a Glance
Questions for Self-Assessment
17. Cost Concepts and Categorisation
Introduction
17.1 What is Cost?
17.2 What are Expenses?
17.3 What is Loss?
17.4 Classifi cation of Costs
17.5 Natural Classifi cation of Costs
17.6 Some Other Costs
17.7 Relevant Costs for Decision-making and Planning
17.8 Costs for Control
Chapter at a Glance
Questions for Self-Assessment
18. Job-Order, Batch, and Contract Costing
18.1 Job-Order Costing
18.2 Cost Accounting Cycle and Job Cost Sheet
18.3 Recording of Job-Costs in Accounts
18.4 Accounting for Materials Consumed
18.5 Accounting for Labour Involved
18.6 Accounting for Manufacturing Overheads
18.7 Accounting for Over-applied or Under-applied Manufacturing Overheads
18.8 Accounting for the Completed Jobs
18.9 Accounting for Non-Manufacturing Costs
18.10 Job-Order Costing System in Service Organisations
18.11 Batch Costing
18.12 Contract Costing
18.13 Determination of Profi t in Incomplete Contracts
18.14 Cost Plus Contracts
Chapter at a Glance
Questions for Self-Assessment
Problems (With Suggested Solutions)
19. Unit Costing and Operating Costing
Introduction
19.1 Unit Costing
19.2 Cost Sheet
19.3 Bid Price
19.4 Operating Costing
19.5 Vehicle as a Cost Centre
19.6 Ratio Analysis Technique
Chapter at a Glance
Questions for Self-Assessment
Problems
20. Activity Based Costing (ABC)
Introduction
20.1 Historical Perspective
20.2 How’s and Why’s of ABC?
20.3 ABC in Service Industries
20.4 Arguments against ABC
Chapter at a Glance
Questions for Self-Assessment
21. Variable Costing and Absorption (Full) Costing
Introduction
21.1 Variable Costing and Absorption Costing: A Comparison
21.2 Advantages and Limitations of Variable Costing
Chapter at a Glance
Questions for Self-Assessment
Problems
22. Relevant Costs for Decision-making
Introduction
22.1 Relevant vs. Irrelevant Costs
22.2 What is Cost?
22.3 Opportunity Costs and Outlay Costs
22.4 Sunk Costs and Committed Costs
22.5 Are all Past Costs Irrelevant?
22.6 Qualitative Aspects of Decision-making
Chapter at a Glance
Questions for Self-Assessment
Problems (With Suggested Solutions)
23. Contribution Analysis and Break-Even Point (BEP); or Cost-Volume-Profi t (CVP) Analysis
23.1 Fixed Costs and Variable Costs
23.2 Algebraic Presentation of BEP
23.3 Arithmetical Presentation of BEP
23.4 Various Expressions of BEP
23.5 Some Other Uses of Contribution Analysis
Chapter at a Glance
Questions for Self-Assessment
Problems (With Suggested Solutions)
24. Management and Control of Inventories
24.1 Components and Importance of Inventories
24.2 Economic Order Quantity (EOQ)
24.3 Basic Economic Order Quantity (EOQ) Model
24.4 EOQ Formula vs. Trial and Error Method
24.5 EOQ Formula
24.6 Economic Order Quantity (EOQ) and Optimum Order Quantity (OOQ)
24.7 Economic Order Quantity (EOQ) and Infl ation
24.8 Components of Inventory Carrying Costs
24.9 Lead Time
24.10 Order Point
24.11 Safety Stock
24.12 Other Variable Factors Affecting EOQ
24.13 ABC Analysis (or VED Analysis)
24.14 Categorisation of Items for ABC Analysis
24.15 Inventory Control Through Ratio Analysis
24.16 Just-In-Time (JIT) System vs. Just-In-Case (JIC) System
24.17 Towards Evolving an Effective System for Inventory Management, Monitoring and Control
24.18 Strategies for Achieving Success in Inventory Management and Control
24.19 Inventory Management in India
24.20 Rooms for Improvement—Some Suggestions
Chapter at a Glance
Questions for Self-Assessment
Problems (With Suggested Solutions)
Problems
25. Corporate Planning, Budgeting and Control
Introduction
25.1 Long-Range Plan (LRP) vs. Short-Range Plan (SRP)
25.2 Performance Budgeting
25.3 Steps and Stages
25.4 Budgeting in a Manufacturing Company
25.5 Per Cent of Sales Method
25.6 Combination Method
25.7 Pro Forma Balance Sheet
25.8 Budgeting Process in a Manufacturing Company
25.9 Incremental Budgeting vs. Zero-Base Budgeting (ZBB)
25.10 Performance Monitoring and Review
Chapter at a Glance
Questions for Self-Assessment
Problems
26. Capital Budgeting (Capital Investment Decisions)
26.1 What is Capital Budgeting?
26.2 Capital Budgeting: Why Considered so Important?
26.3 Phases of Capital Budgeting Process
26.4 How to Avoid the Time–Over–Runs?
26.5 Performance Review
26.6 Classifi cation of Projects
26.7 Criteria of Investment Evaluation
26.8 Some General Guiding Principles
Chapter at a Glance
Questions for Self-Assessment
Problems
27. Responsibility Accounting
Introduction
27.1 Aims and Objectives of Responsibility Accounting
27.2 Responsibility Centres
27.3 Types of Responsibility Centres
27.4 Types of Transfer Prices
27.5 Transfer Pricing Policies
27.6 Profi t Centre Evaluation
27.7 Investment Centres
27.8 Return on Investment (ROI) Analysis
Chapter at a Glance
Questions for Self-Assessment
Problems (With Suggested Solutions)
Problems
28. Cost Management and Control—Steps and Strategies
Introduction
28.1 Cost Control Drivers
28.2 Value Chain
28.3 Total Cost Management (TCM) and Business Process Re-engineering (BPR)
28.4 TCM and TQM
28.5 Cost Control
28.6 Value Your Vendors
28.7 Compare and Compete with the Best
28.8 Flexible Manufacturing System
28.9 Just-in-Time (JIT) vs. Just-in-Case (JIC)
28.10 Brand Extension
28.11 Advertisement Expenses
28.12 Distributions and Servicing Channel
28.13 Use of Info-Tech and I.T.
28.14 Cut Non-Manufacturing Overheads
28.15 Adopt Some Innovative Strategies
28.16 Cut Cost of Human Capital
28.17 Adopt Activity Based Costing (ABC)
28.18 Some Key Factors for Success
28.19 Total Cost Management in India
Chapter at a Glance
Questions for Self-Assessment
29. Standard Costs
Introduction
29.1 What Do We Mean by ‘Standards’?
29.2 Budgets vs. Standard
29.3 Classifi cation of Standard Costs
29.4 How to Set Up the Cost Standards?
29.5 Components of Standard Cost
Chapter at a Glance
Questions for Self-Assessment
Problems (With Suggested Solutions)
Problems
30. Variance Analysis: Cost Variances
30.1 What is Variance Analysis Technique?
30.2 Cost Variances
30.3 Material Cost Variances (MCVs)
30.4 Material Price Variance (MPV)
30.5 Material Usage (Quantity) Variance
30.6 Labour Cost Variance
30.7 Idle Time Variance and Labour Revised Effi ciency Variance
30.8 Overhead Variance
30.9 Calendar Variance
30.10 Capacity Variance
Chapter at a Glance
Questions for Self-Assessment
Problems
31. Variance Analysis: Revenue and Profi t Variances
Introduction
31.1 Sales Variances
31.2 Sales Revenue Variance (SRV)
31.3 Profi t Variance
31.4 Budgeted Profi t and Actual Profi t—A Reconciliation
31.5 Variance Reporting
31.6 Some Key Ratios
31.7 The Tabular Form (Method) of Presentation
31.8 Disposition of Variance
Chapter at a Glance
Questions for Self-Assessment
32. Short-Term Decision Analysis
Introduction
32.1 Analysis of the Framework
32.2 Types of Relevant Costs
32.3 Applications of Short-Term Decisions
Chapter at a Glance
Questions for Self-Assessment
Problems
33. Human Resources Accounting
Introduction
33.1 Nature of Human Resources Accounting (HRA)
33.2 Objectives of Human Resources Accounting (HRA)
33.3 Advantages of Human Resources Accounting (HRA)
33.4 Monetary Measures of (or Valuation Approaches to) the Human Resources
33.5 Non-Monetary Measures of the Human Resources
33.6 Models of Human Resources Accounting
33.7 Concluding Remarks
33.8 Some Personnel Ratios
33.9 Personnel Reports and Audit Budgets
33.10 Human Resources Information System (HRIS)
Chapter at a Glance
Questions for Self-Assessment
Bibliography
Index