LECTURE NOTES ON ACCOUNTING FOR MANAGERS
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)LECTURE NOTESONACCOUNTING FOR MANAGERS2018 – 2019I M.B.A I SemesterMs. K YAMUNA, Assistant ProfessorCHADALAWADA RAMANAMMA ENGINEERING COLLEGE(AUTONOMOUS)Chadalawada Nagar, Renigunta Road, Tirupati – 517 506Department of Management Studies1 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)CHADALAWADA RAMANAMMA ENGINEERING COLLEGE, - SEMINARDEPARTMENT OF MANAGEMENT STUDIESM.B.A. I year First Semester, Academic Year: 2018-19Course NameCourse CoordinatorL–T–PCourse Instructor::::ACCOUNTING FOR MANAGERS (17CE00103)4–0–0Ms. K YAMUNASYLLABUSUnit – IIntroduction to accountingClasses: 14Introduction to Accounting: Need and Types of Accounting, Users of Accounting, conceptsand conventions of Accounting, Accounting Equation (problems on accounting equation),Generally Accepted Accounting Principles (GAAP).Preparation of books of Accounts: Journals, Subsidiary books, three column cash book,ledgers and trial balance. Depreciation- Straight line and Written down Value Methods.Unit – IIPreparation of financial statementsClasses: 13Preparation of Financial Statements: Final Accounts: Meaning, Features, Uses andPreparation of Trading Account, Statement of Profit and Loss and Balance Sheet – Adjustingand Closing Entries. (Basic problems on Final accounts of companies)Rectification of Errors: Types of Errors – Rectification of Errors before and afterPreparations of Trial balance.Unit - IIIAnalysis of financial statementsClasses: 14Analysis of Financial Statements I: Ratio Analysis- solvency ratios, profitability ratios,activity ratios, liquidity ratios, market capitalization ratios; Common Size Statement;Comparative Balance Sheet and Trend Analysis.Bank Reconciliation Statement – Need – Reasons for Difference between Cash Book and PassBook Balances – Problems on Favourable and Overdraft Balances.Unit – IVAnalysis of financial statementsClasses: 142 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)Analysis of Financial Statements II: Funds Flow Statement: Meaning, Concept of Grossand Net Working Capital, Preparation of Schedule of Changes in Working Capital,Preparation of Funds Flow Statement and its analysis;Cash Flow Statement: Various cash and non-cash transactions, flow of cash, differencebetween cash flow and fund flow, preparation of Cash Flow Statement and its analysis.Unit – VAccounting standards and IFRS and emerging issues in Classes: 10accountingAccounting Standards and IFRS: Need for accounting standards - IFRS and proposedchanges in Indian Accounting Standards. Emerging issues in Accounting: CorporateGovernance and clause 49 of the listing agreement, Human Resource Accounting, ForensicAccounting, Window Dressing- Sustainability Reporting. Fundamentals of Taxation:Overview of Heads of Income, deductions u/s 80C, Income Tax Rates and Returns – ForIndividuals only (Only Theory)Text books: Financial Accounting: A Managerial Perspective, Narayanaswamy R, 5/e , PHI, 2014 A Text book of Accounting For Management, Maheswari S. N,Maheswari Sharad K.Maheswari , 2/e, Vikas Publishing house (P) Ltd. Financial Accounting, Tulsian P. C, 1/e, Pearson Education. Accounting for managers, Madegowda J, Himalaya Publishing House. Advanced Accountancy, Gupta R. L & Radhaswamy M, Sultan Chand Publications. Financial Accounting, Jain S. P and Narang K L, Kalyani Publishers. Business Taxation, Akhileshwar Pathak and Savan Godiawala, 2/e, McGraw HillEducation(India) Pvt. Ltd, 2013.Reference books: Financial Accounting for Management: An Analytical Perspective, Ambrish Gupta,4/e, Pearson Education. Introduction to Financial Statement Analysis, Ashish K Bhattacharya, Elsevier India. Financial Accounting – Raman B. S,Vol I & Vol II, 1 /e, United Publishers, 2009.3 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)CHADALAWADA RAMANAMMA ENGINEERING COLLEGE, TIRUPATI(AUTONOMOUS)DEPARTMENT OF MANAGEMENT STUDIESLESSON PLANSubject: ACCOUNTING FOR MANAGERSSub Code: 17CE00103Class: M.B.AAcademicSemester: ISection: A & BBranch: M.B.AYear: 2018-19Name of the faculty: Ms. K YAMUNALectureNo.1Date(As perAcademiccalendar)Topics to be covered3Introduction to AccountingNeed and Types of AccountingUsers of Accounting4Accounting Principles (GAAP)5Accounting concepts and conventions610Accounting Equation (problems on accounting)equation)Journals (theory and problems)Journals ( problems)Ledgers (theory and problems)Ledgers (problems)11Trial balance (theory and problems)278912Subsidiary books – 6 types explanation13Purchase book ( problem)14Purchase return book ( problem)15sales book ( problem)16Sales return book ( problem)17Bills payable book ( problem)18Bills Receivable book ( problem)19Cash book – one and two columns20Three column cash book ( problem)21Depreciation methods – theory explanation22Depreciation – straight line method ( problem)ActualDate ofcompletion4 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)Remarks
K YAMUNA (ASST.PROF. CREC)LectureNo.Date(As perAcademiccalendar)ACCOUNTING FOR MANAGERS (17CE00103)ActualDate ofcompletionTopics to be covered23Depreciation( problem)2427Final Accounts: Meaning, Features, Uses andPreparation of final accountsTrading Account ( Explanation and problem)Statement of Profit and Loss ( Explanation andproblem)Balance Sheet ( Explanation and problem)28Final accounts ( simple problems)29Final accounts (problems with adjustments)30Types of Errors, Rectification of Errors before andafter Preparations of Trial balance.31Rectification of Errors ( problems)32Ratio Analysis – meaning , explanation , types ofratios, advantages and disadvantagesliquidity ratios, activity ratios (theory and problem)solvency ratios, profitability ratios (theory o analysis ( complex problems)36Ratio analysis ( complex problems)37Common Size Statement (income)- problemCommon Size Statement (balance sheet)- problemComparative income statement – problemComparative Balance Sheet – problemTrend Analysis – problemBank Reconciliation Statement – Need – Reasonsfor Difference between Cash Book and Pass BookBalancesProblems on Favourable and Overdraft Balances38394041424344454647Problems on Favourable and Overdraft BalancesFunds Flow Statement: Meaning, Concept of Grossand Net Working CapitalPreparation of Schedule of Changes in WorkingCapital ( problems)Preparation of Funds Flow Statement and itsanalysis ( problems)5 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)Remarks
K YAMUNA (ASST.PROF. CREC)LectureNo.Date(As perAcademiccalendar)ACCOUNTING FOR MANAGERS (17CE00103)Topics to be covered48Various cash and non-cash transactions, flow ofcash, difference between cash flow and fund flow49preparation of Cash Flow Statement and its analysis(problems)Accounting Standards – meaning, Need foraccounting standards,IFRS and proposed changes in Indian AccountingStandardsCorporate Governance and clause 49 of the listingagreement,Human Resource Accounting, Forensic Accounting,505152535458Window Dressing- Sustainability ReportingFundamentals of TaxationOverview of Heads of IncomeDeductions u/s 80C, Income Tax Rates and Returns–SimpleFor Individualsonlyproblems tocalculate Heads of Income59Case studies555657Course InstructorHead of the Dept.ActualDate ofcompletionRemarksPrincipal6 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)UNIT-IINTRODUCTIONIntroduction to Accounting: Need and Types of Accounting, Users of Accounting, conceptsand conventions of Accounting, Accounting Equation (problems on accounting equation),Generally Accepted Accounting Principles (GAAP).Preparation of books of Accounts: Journals, Subsidiary books, three column cash book,ledgers and trial balance. Depreciation- Straight line and Written down Value Methods.Learning ObjectivesAfter reading this lesson, the reader should be able to: Know the Evolution of Accounting Understand the Definition of Accounting Comprehend the Scope and Function of Accounting Ascertain the Users of Accounting Information Know the Specialized Accounting Fields Understand the Accounting Concepts and Conventions Realize the Need for Accounting Standards7 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)1.1 ACCOUNTING - INTRODUCTIONAccounting is aptly called the language of business. This designation is applied to accountingbecause it is the method of communicating business information. The basic function of anylanguage is to serve as a means of communication. Accounting duly serves this function. Thetask of learning accounting is essentially the same as the task of learning a new language. Butthe acceleration of change in business organization has contributed to increase the complexitiesin this language. Like other languages, it is undergoing continuous change in an attempt todiscover better means of communications. To enable the accounting language to convey thesame meaning to all stakeholders, it should be made standard. To make it a standard languagecertain accounting principles, concepts and standards have been developed over a period oftime. This lesson dwells upon the different dimensions of accounting, accounting concepts,accounting principles and the accounting standards.1.2 Evolution of AccountingAccounting is as old as money itself. It has evolved, as have medicine, law and most otherfields of human activity in response to the social and economic needs of society. People in allcivilizations have maintained various types of records of business activities. The oldest knownare clay tablet records of the payment of wages in babylonia around 600 b.c. accounting waspracticed in india twenty-four centuries ago as is clear from kautilya‘s book ‗arthshastra‘which clearly indicates the existence and need of proper accounting and audit.For the most part, early accounting dealt only with limited aspects of the financial operationsof private or governmental enterprises. Complete accounting system for an enterprise whichcame to be called as ―double entry system‖ was developed in italy in the 15th century. The firstknown description of the system was published there in 1494 by a franciscan monk by thename luca pacioli.The expanded business operations initiated by the industrial revolution required increasinglylarge amounts of money which in turn resulted in the development of the corporation form oforganizations. As corporations became larger, an increasing number of individuals andinstitutions looked to accountants to provide economic information about these enterprises.For e.g. Prospective investors and creditors sought information about a corporation‘s financialstatus. Government agencies required financial information for purposes of taxation andregulation. Thus accounting began to expand its function of meeting the needs of relativelyfew owners to a public role of meeting the needs of a variety of interested parties.8 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)1.3 Definition of AccountingBefore attempting to define accounting, it may be made clear that there is no unanimityamong accountants as to its precise definition. Anyhow let us examine three populardefinitions on the subject:Accounting has been defined by the american accounting association committee as:“the process of identifying, measuring and communicating economic information to permitinformed judgments and decisions by users of the information”. This may be considered as agood definition because of its focus on accounting as an aid to decision making.Another popular definition on accounting was given by american accounting principles boardin 1970, which defined it as:―accounting is a service society. Its function is to provide quantitative information, primarilyfinancial in nature, about economic entities that is useful in making economic decision, inmaking reasoned choices among alternative courses of action”.1.4 Nature and scope of Accounting Accounting may be regarded as an art of recording, classifying and summarizing ofmoney transactions and eventsAccounting may be regarded as a science in its being able to use scientific andanalytical techniques for solving managerial problemsAccounting may be regarded as an information system for providing informationneeded by the stakeholdersAccounting may be regarded as a service function in being able to serve the societythrough social accountingAccounting may be regarded as a language of the business because the preparers andinterpreters of the financial information should understand the common language ofaccounting1.5 Limitations of Accounting Historical information: Accounting reports are based on the past historicalinformationFinancial information: Accounting does not reveal non monetary information likecustomer satisfaction, market competition, market share, etc.Inadequate Cost information: Accounting does not provide cost information to gaugethe product or department-wise profitability9 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC) ACCOUNTING FOR MANAGERS (17CE00103)Personal judgment: Financial information is clouded by personal judgment of thepreparers like provisions, valuations, etc.1.6 FUNCTIONS OF ACCOUNTING: Keeping Systematic Records:This is the fundamental function of accounting. The transactions of the business are properlyrecorded, classified and summarized into final financial statements – income statement and thebalance sheet. Protecting The Business Properties:The second function of accounting is to protect the properties of the business by maintainingproper record of various assets and thus enabling the management to exercise proper controlover them. Communicating The Results:As accounting has been designated as the language of business, its third function is tocommunicate financial information in respect of net profits, assets, liabilities, etc., to theinterested parties. Meeting Legal Requirements:The fourth and last function of accounting is to devise such a system as will meet the legalrequirements. The provisions of various laws such as the companies act, income tax act, etc.,require the submission of various statements like income tax returns, annual accounts and soon. Accounting system aims at fulfilling this requirement of law.1.7 TYPES OF ACCOUNTING:The information needs of a business enterprise can be outlined and illustrated with the help ofthe following chart:Chart Showing Types of Information10 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS ngNon- tCostInformationInformationInformationOperating Information:By operating information, we mean the information which is required to conduct theday-to-day activities. Examples of operating information are: amount of wages paid andpayable to employees, information about the stock of finished goods available for sale andeach one‘s cost and selling price, information about amounts owed to and owing by thebusiness enterprise, information about stock of raw materials, spare parts and accessories andso on. By far, the largest quantity of accounting information provides the raw data (input) forfinancial accounting, management accounting and cost accounting.Financial Accounting:Financial accounting information is intended both for owners and managers and also for theuse of individuals and agencies external to the business. This accounting is concerned with therecording of transactions for a business enterprise and the periodic preparation of variousreports from such records. The records may be for general purpose or for a special purpose. Adetailed account of the function of financial accounting has been given earlier in this lesson.Management Accounting:Management accounting employs both historical and estimated data in assistingmanagement in daily operations and in planning for future operations. It deals with specific11 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)problems that confront enterprise managers at various organizational levels. The managementaccountant is frequently concerned with identifying alternative courses of action and thenhelping to select the best one. For e.g. The accountant may help the finance manager inpreparing plans for future financing or may help the sales manager in determining the sellingprice to be fixed on a new product by providing suitable data. Generally managementaccounting information is used in three important management functions: (1) control(2) co-ordination and (3) planning. Marginal costing is an important technique of managementaccounting which provides multi dimensional information that facilitates decision making.Cost Accounting:The industrial revolution in england posed a challenge to the development ofaccounting as a tool of industrial management. This necessitated the development of costingtechniques as guides to management action. Cost accounting emphasizes the determination andthe control of costs. It is concerned primarily with the cost of manufacturing processes. Inaddition, one of the principal functions of cost accounting is to assemble and interpret costdata, both actual and prospective, for the use of management in controlling current operationsand in planning for the future.All of the activities described above are related to accounting and in all of them the focus ison providing accounting information to enable decisions to be made.1.8 GROUPS INTERESTED IN ACCOUNTING INFORMATIONThere are several groups of people who are interested in the accounting informationrelating to the business enterprise. Following are some of them:Shareholders:Shareholders as owners are interested in knowing the profitability of the businesstransactions and the distribution of capital in the form of assets and liabilities. In fact,accounting developed several centuries ago to supply information to those who had investedtheir funds in business enterprise.Management:With the advent of joint stock company form of organization the gap betweenownership and management widened. In most cases the shareholders act merely as renders of12 CHADALAWADA RAMANAMMA ENGINEERING COLLEGE (AUTONOMOUS)
K YAMUNA (ASST.PROF. CREC)ACCOUNTING FOR MANAGERS (17CE00103)capital and the management of the company passes into the hands of professional managers.The accounting disclosures greatly help them in knowing about what has happened and whatshould be done to improve the profitability and financial position of the enterprise.Potential Investors:An individual who is planning to make an investment in a business would like to knowabout its profitability and financial position. An analysis of the financial statements would helphim in this respect.Creditors:As creditors have extended credit to the company, they are much worried about therepaying capacity of the company. For this purpose they require its financial statements, ananalysis of which will tell about the solvency position of the company.Government:Any popular government has to keep a watch on big businesses regarding the mannerin which they build business empires without regard to the interests of the community.Restricting monopolies is something that is common even in capitalist countries. For this, it isnecessary that proper accounts are made available to t
Name of the faculty: Ms. K YAMUNA Lecture No. Date (As per Academic calendar) Topics t o be covered Actual Date of . Forensic Accounting, 54 Window Dressing - Sustainability Reporting . It has evolved, a s have medicine, law and most other fields of human activity in response to the social and economic needs of society. People in all
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