व्यवस्थापन लेखांकन Management Accounting

थोडक्यात सारांश

Management accounting (व्यवस्थापन लेखाशास्त्र) is the use of accounting information to help managers plan, control and take decisions. It takes data from financial accounting and cost accounting and presents it in a useful form for the internal management. This topic covers its meaning, nature, scope, functions, tools and limitations.

महत्त्वाचे मुद्दे

• Definition (Anglo-American Council on Productivity, 1950): management accounting is the presentation of accounting information in such a way as to assist management in creating policy and in the day-to-day operation of an undertaking.
• CIMA describes it as the application of accounting and management skills to generate, analyse and use information for planning, decision-making and control.
• Nature: forward-looking (future oriented), selective, no fixed rules (not governed by GAAP), uses both money and non-money data, serves internal management.
• It does not take decisions itself; it supplies information for decisions.
• Scope: financial accounting, cost accounting, budgeting and forecasting, cost control, reporting to management, tax planning, internal audit, statistical methods, office services and data processing.
• Functions: planning and forecasting, organising, controlling, coordinating, motivating, communicating and interpreting data.
• Tools and techniques: financial statement analysis, ratio analysis, fund flow and cash flow statements, marginal costing, budgetary control, standard costing, decision accounting, responsibility accounting.
• The person in charge is the management accountant or controller.
• Limitations: depends on the accuracy of basic records, wide scope requires knowledge of many subjects, costly to install, personal bias in interpretation, it is only a tool and not a substitute for management.

महत्त्वाच्या संज्ञा

• Decision-making – choosing the best course from alternatives.
• Controller – management accountant who looks after planning, reporting and control.
• Responsibility accounting – costs and revenues are traced to the managers responsible for them.
• Management Information System (MIS) – system providing timely information to managers.

नमुने व सूत्रे

५ महत्त्वाचे प्रश्न

Q1. Define management accounting.

Management accounting is the presentation of accounting information in a way that helps management in making policies, planning, controlling and running the business day to day.

Q2. State any four tools of management accounting.

Ratio analysis, budgetary control, standard costing and marginal costing (also cash flow analysis and decision accounting).

Q3. Explain the nature and scope of management accounting.

Outline: nature (forward-looking, selective, provides data not decisions, no fixed format, cause-and-effect study, uses many disciplines); scope (list and explain eight areas above with one line each).

Q4. Distinguish between financial accounting and management accounting.

Outline: draw the table above and add points on precision (financial needs exact figures, management can use estimates), users, and publication.

Q5. Explain the functions and limitations of management accounting.

Outline: functions – planning, controlling, organising, coordinating, motivating, communicating, interpreting; limitations – as listed above, and the conclusion that it supports but cannot replace managerial judgement.

परीक्षेसाठी टीप

Begin a long answer with the Anglo-American Council definition, then give a short example, such as using marginal costing to decide whether to accept a special order.

थोडक्यात सारांश

Financial statements show figures, but analysis turns them into meaning. Analysis of financial statements (वित्तीय विवरणांचे विश्लेषण) is the study of the relationship between items in the balance sheet and profit and loss statement to judge profitability, liquidity and solvency. The main tools are comparative statements, common-size statements, trend analysis, ratio analysis and cash flow analysis.

महत्त्वाचे मुद्दे

• Horizontal analysis compares figures of two or more years (comparative statements, trend analysis).
• Vertical analysis studies one year's figures against a base total (common-size statements).
• Comparative statement: shows figures of two years, absolute change and percentage change.
• Common-size statement: each item is shown as a percentage of a total — revenue from operations (for the income statement) or total assets/total liabilities (for the balance sheet).
• Trend analysis: one year is taken as base = 100 and other years are shown as index numbers.
• Users: management, shareholders, creditors, banks, employees, government and investors.
• Limitations: based on historical figures, ignores inflation, ignores qualitative factors, different accounting policies make comparison hard, window dressing can mislead.

महत्त्वाच्या संज्ञा

• Analysis – arranging data into groups for study.
• Interpretation – explaining the meaning of the analysed data.
• Base year – year taken as 100 in trend analysis.
• Inter-firm comparison – comparing one firm with another in the same industry.

नमुने व सूत्रे

• Absolute change = Current year − Previous year
• % change = (Absolute change ÷ Previous year) × 100
• Common-size % = (Item ÷ Revenue from operations or total assets) × 100
• Trend % = (Current year figure ÷ Base year figure) × 100

५ महत्त्वाचे प्रश्न

Q1. What is a common-size statement?

A statement in which each item is shown as a percentage of a common base (revenue from operations or total assets), so firms of different sizes can be compared.

Q2. Distinguish horizontal and vertical analysis.

Horizontal analysis compares the same item over several years; vertical analysis compares items within one year's statement to a total.

Q3. Prepare a comparative income statement from the following.

Interpretation: sales rose by 20% but cost of goods sold rose faster (25%), so gross profit grew only 12.5% and operating profit only 8%. The firm should control its cost of goods sold.

Q4. Prepare a common-size income statement for 2025 from the data in Q3.

Q5. Explain the meaning, objectives, tools and limitations of financial statement analysis.

Outline: meaning; objectives (profitability, liquidity, solvency, efficiency, future prospects); tools (comparative, common-size, trend, ratio, cash flow); limitations (historical, inflation, qualitative factors ignored, window dressing, analyst's bias).

परीक्षेसाठी टीप

Never stop at the table. Write a 2–3 line interpretation below every comparative or common-size statement; it often carries separate marks.

थोडक्यात सारांश

A ratio shows the relationship between two related accounting figures. Ratio analysis (गुणोत्तर विश्लेषण) uses such ratios to judge a firm's liquidity, solvency, profitability and efficiency. Ratios make large figures easy to compare between years and between firms.

महत्त्वाचे मुद्दे

• A ratio may be shown as a pure ratio (2:1), a percentage (25%) or as times (10 times).
• Liquidity ratios: current ratio, quick (liquid/acid-test) ratio.
• Solvency ratios: debt-equity ratio, proprietary ratio, interest coverage ratio.
• Activity (turnover) ratios: inventory turnover, trade receivables turnover, trade payables turnover, working capital turnover.
• Profitability ratios: gross profit ratio, net profit ratio, operating ratio, return on capital employed (ROCE), return on equity, earnings per share.
• Ideal norms (rules of thumb): current ratio 2:1, quick ratio 1:1, debt-equity 2:1 or lower.
• Limitations: based on past data, different accounting methods, no single standard, ignore qualitative factors, window dressing.

महत्त्वाच्या संज्ञा

• Current assets – assets converted to cash within a year (inventory, receivables, cash, prepaid expenses).
• Quick assets – current assets minus inventory and prepaid expenses.
• Capital employed – shareholders' funds + long-term debt (or fixed assets + working capital).
• Cost of goods sold (COGS) – sales minus gross profit.

नमुने व सूत्रे

• Current ratio = Current assets ÷ Current liabilities
• Quick ratio = Quick assets ÷ Current liabilities
• Debt-equity ratio = Long-term debt ÷ Shareholders' funds
• Gross profit ratio = (Gross profit ÷ Net sales) × 100
• Net profit ratio = (Net profit ÷ Net sales) × 100
• Operating ratio = ((COGS + Operating expenses) ÷ Net sales) × 100
• Inventory turnover = COGS ÷ Average inventory; Average inventory = (Opening + Closing) ÷ 2
• Debtors turnover = Net credit sales ÷ Average trade receivables; Collection period = 365 ÷ Debtors turnover
• ROCE = (Profit before interest and tax ÷ Capital employed) × 100
• EPS = (Net profit after tax − Preference dividend) ÷ Number of equity shares

५ महत्त्वाचे प्रश्न

Q1. What is the quick ratio? What is its ideal norm?

Quick ratio = quick assets ÷ current liabilities. It tests the ability to pay short-term debts without selling stock. The ideal norm is 1:1.

Q2. State the limitations of ratio analysis.

Ratios depend on past figures, ignore price changes and qualitative factors, can be affected by window dressing, and are hard to compare when firms use different accounting methods.

Q3. From the following, calculate the current ratio and quick ratio: current assets ₹4,00,000 (including inventory ₹1,00,000 and prepaid expenses ₹10,000); current liabilities ₹2,00,000.

Current ratio = 4,00,000 ÷ 2,00,000 = 2:1.
Quick assets = 4,00,000 − 1,00,000 − 10,000 = ₹2,90,000.
Quick ratio = 2,90,000 ÷ 2,00,000 = 1.45:1.
The firm has good short-term liquidity.

Q4. Sales ₹12,00,000; gross profit ₹3,00,000; net profit ₹1,20,000; opening inventory ₹80,000; closing inventory ₹1,00,000; long-term debt ₹3,00,000; shareholders' funds ₹6,00,000. Calculate GP ratio, NP ratio, inventory turnover and debt-equity ratio.

Q5. Explain the meaning, classification, advantages and limitations of ratio analysis.

Outline: meaning; classification (liquidity, solvency, activity, profitability – two ratios of each with formula); advantages (simplifies data, helps comparison, planning, control, finds weak areas); limitations as above.

परीक्षेसाठी टीप

Write each ratio as formula → substitution → answer → one-line comment. Even if the arithmetic slips, the formula line earns marks.

थोडक्यात सारांश

A cash flow statement (रोकड प्रवाह विवरण) shows where cash came from and where it went during a year. Under AS 3 / Ind AS 7, cash flows are grouped into operating, investing and financing activities. It explains why cash changed even when the firm made a profit.

महत्त्वाचे मुद्दे

• "Cash" includes cash in hand, demand deposits with banks and cash equivalents (short-term, highly liquid investments with a maturity of 3 months or less).
• Operating activities – main revenue-earning activities: cash from customers, payments to suppliers and employees, income tax paid.
• Investing activities – buying and selling long-term assets and investments; interest and dividend received (for a non-financial company).
• Financing activities – issue and redemption of shares and debentures, long-term loans, interest and dividend paid.
• Operating cash flow can be found by the direct method (actual receipts and payments) or the indirect method (start from net profit and adjust).
• In the indirect method, non-cash items (depreciation, goodwill written off, loss on sale of assets) are added back and non-operating gains are deducted.
• Increase in current assets → deduct; decrease in current assets → add. Increase in current liabilities → add; decrease → deduct.
• Uses: liquidity planning, judging ability to pay dividends and debts, comparing profit with cash.

महत्त्वाच्या संज्ञा

• Cash equivalents – short-term liquid investments easily turned into known amounts of cash.
• Non-cash expense – expense with no cash outflow, e.g. depreciation.
• Free cash flow – operating cash flow minus capital expenditure.

नमुने व सूत्रे

Cash flow from operating activities (indirect method):

Net change in cash = Operating + Investing + Financing; Closing cash = Opening cash + Net change.

५ महत्त्वाचे प्रश्न

Q1. What are cash equivalents?

Short-term, highly liquid investments that are readily convertible into known amounts of cash and carry little risk of change in value, generally with a maturity of three months or less.

Q2. Classify: (a) purchase of machinery (b) dividend paid (c) cash sales.

(a) Investing activity (b) financing activity (c) operating activity.

Q3. Calculate cash from operating activities: net profit before tax ₹2,00,000; depreciation ₹50,000; loss on sale of machinery ₹10,000; debtors increased ₹30,000; stock decreased ₹20,000; creditors increased ₹15,000; outstanding expenses decreased ₹5,000; income tax paid ₹40,000.

Q4. Continue Q3: machinery bought ₹3,00,000; machinery sold ₹40,000; shares issued ₹1,00,000; dividend paid ₹50,000; opening cash ₹30,000. Find closing cash.

Q5. Distinguish between a cash flow statement and a fund flow statement.

Outline: cash vs working capital concept; AS 3 requires cash flow, fund flow not required; cash flow useful for short-term planning, fund flow for long-term; cash flow uses three activities, fund flow uses sources and applications with a schedule of changes in working capital.

परीक्षेसाठी टीप

Show loss on sale only in operating adjustments; the actual sale proceeds go in investing activities. Students often add both and get the wrong total.

थोडक्यात सारांश

A fund flow statement (निधी प्रवाह विवरण) shows the sources from which funds (working capital) were obtained and the uses (applications) to which they were put between two balance sheet dates. Here "fund" means net working capital (current assets − current liabilities). It is prepared in two parts: a schedule of changes in working capital and the statement of sources and applications.

महत्त्वाचे मुद्दे

• Flow of funds happens only when a transaction involves one current item and one non-current item, e.g. issue of shares for cash, purchase of machinery for cash.
• Transactions between two current items (e.g. cash paid to creditors) or two non-current items (e.g. shares issued to buy land) cause no flow of funds.
• Sources of funds: funds from operations, issue of shares and debentures, long-term loans, sale of fixed assets and investments, non-trading income.
• Applications of funds: loss from operations, redemption of shares/debentures, repayment of loans, purchase of fixed assets, payment of dividend and tax (when treated as non-current).
• Funds from operations = net profit + non-fund, non-operating debits − non-fund, non-operating credits.
• Increase in a current asset or decrease in a current liability = increase in working capital, and vice versa.
• The fund flow statement is not required by current Accounting Standards (AS 3 requires a cash flow statement), but it is still taught for long-term financial analysis.

महत्त्वाच्या संज्ञा

• Working capital – current assets minus current liabilities.
• Non-current items – fixed assets, long-term investments, share capital, reserves, long-term loans.
• Funds from operations – working capital generated by normal business activities.
• Adjusted P&L account – account prepared to find funds from operations.

नमुने व सूत्रे

Funds from operations:

५ महत्त्वाचे प्रश्न

Q1. What is meant by "flow of funds"?

A change in working capital caused by a transaction that affects one current account and one non-current account, such as issuing shares for cash.

Q2. Distinguish between a fund flow and a cash flow statement.

Fund flow is based on working capital and shows long-term sources and uses; cash flow is based on cash alone, is required by AS 3, and is useful for short-term planning.

Q3. Prepare a schedule of changes in working capital.

Q4. Calculate funds from operations: net profit ₹60,000; depreciation ₹20,000; goodwill written off ₹5,000; profit on sale of machinery ₹3,000.

Funds from operations = 60,000 + 20,000 + 5,000 − 3,000 = ₹82,000.

Q5. Explain the meaning, uses and limitations of a fund flow statement.

Outline: meaning; uses (shows how expansion was financed, judges working capital management, helps plan dividends and borrowing, guides lenders); limitations (not a substitute for P&L and balance sheet, historical, ignores cash changes inside working capital, not required by AS).

परीक्षेसाठी टीप

Balance your schedule: the "increase" and "decrease" columns must total the same after putting the net change on the smaller side. If they don't, recheck each item.

थोडक्यात सारांश

Marginal costing (सीमांत परिव्यय) separates costs into variable and fixed. Only variable costs are charged to products; fixed costs are treated as period costs and recovered from contribution. Cost-Volume-Profit (CVP) analysis studies how changes in sales volume, price and cost affect profit, using tools like P/V ratio, break-even point and margin of safety.

महत्त्वाचे मुद्दे

• Variable cost changes in total with output but stays the same per unit; fixed cost stays the same in total within a range of output.
• Contribution = sales − variable cost; it first covers fixed cost, and the rest is profit.
• P/V ratio (profit-volume ratio) shows contribution as a percentage of sales; a higher ratio means higher profitability.
• Break-even point (BEP): the level of sales where there is no profit and no loss (contribution = fixed cost).
• Margin of safety (MoS): sales above the break-even point; a big MoS shows a sound business.
• Uses for decisions: make or buy, accept a special order below normal price, product mix, shut down or continue, pricing in a slump.
• Limitations: difficult to split semi-variable costs, assumes constant prices and costs, ignores fixed cost in stock valuation, not accepted for external reporting under AS 2.

महत्त्वाच्या संज्ञा

• Marginal cost – the cost of producing one extra unit; equal to variable cost per unit.
• Break-even chart – graph showing total cost and sales lines meeting at BEP.
• Angle of incidence – angle at which sales line cuts the total cost line; a large angle means high profit.
• Key factor (limiting factor) – the factor that limits output, e.g. raw material or machine hours.

नमुने व सूत्रे

• Contribution = Sales − Variable cost = Fixed cost + Profit
• P/V ratio = (Contribution ÷ Sales) × 100 = (Change in profit ÷ Change in sales) × 100
• BEP (units) = Fixed cost ÷ Contribution per unit
• BEP (₹) = Fixed cost ÷ P/V ratio
• Margin of safety = Actual sales − BEP sales = Profit ÷ P/V ratio
• Sales for desired profit = (Fixed cost + Desired profit) ÷ P/V ratio

५ महत्त्वाचे प्रश्न

Q1. What is contribution?

The excess of sales over variable cost. It contributes first towards fixed cost and then towards profit.

Q2. What is margin of safety?

The amount by which actual sales exceed break-even sales. It shows how much sales can fall before the firm makes a loss.

Q3. Selling price ₹100 per unit; variable cost ₹60 per unit; fixed cost ₹2,00,000; actual sales 8,000 units. Find P/V ratio, BEP, margin of safety and profit.

Check: MoS × P/V ratio = 3,00,000 × 40% = ₹1,20,000. ✔

Q4. From the data in Q3, find the sales needed to earn a profit of ₹1,00,000.

Sales = (2,00,000 + 1,00,000) ÷ 40% = ₹7,50,000 (7,500 units).

Q5. Explain marginal costing, its features, advantages and limitations.

Outline: meaning; features (fixed/variable split, stock at marginal cost, contribution focus, fixed cost as period cost); advantages (simple, helps decisions, cost control, profit planning, avoids under/over-absorption); limitations (cost classification difficult, ignores time element, not for external reports, may lead to under-pricing).

परीक्षेसाठी टीप

Always find the P/V ratio first; every other CVP answer comes from it. Verify profit with "MoS × P/V ratio" as a quick check.

थोडक्यात सारांश

A budget (अंदाजपत्रक) is a plan for a future period expressed in money and quantities. Budgetary control is the system of preparing budgets for each department, comparing actual results with budgeted figures, finding the reasons for differences, and taking corrective action. It is a key tool for planning, coordination and control.

महत्त्वाचे मुद्दे

• CIMA: a budget is a quantitative statement for a defined period, which may include planned revenues, expenses, assets, liabilities and cash flows.
• Essentials of budgetary control: clear objectives, budget committee and budget officer, budget manual, budget period, key (limiting) factor, support of top management, flexibility.
• The key factor (principal budget factor) limits activity and is considered first — usually sales, sometimes raw material, labour or machine capacity.
• Classification by function: sales, production, materials, labour, overheads, cash, capital expenditure and master budget (summary of all).
• By flexibility: fixed budget (one level of activity) and flexible budget (several levels of activity).
• By time: long-term, short-term, current.
• Zero-based budgeting (ZBB): every activity is justified from zero, not from last year's figures (Peter Pyhrr, Texas Instruments, 1970s).
• Cash budget forecasts cash receipts and payments to show surplus or shortage in each month.
• Advantages: planning, coordination, control, cost reduction, fixing responsibility, motivation.
• Limitations: based on estimates, rigid if not revised, time and cost, may cause conflict between departments.

महत्त्वाच्या संज्ञा

• Budget manual – document setting out budget procedures, responsibilities and forms.
• Master budget – final summary budget combining all functional budgets.
• Flexible budget – budget that changes with the level of activity.
• Budget variance – difference between budgeted and actual figures.

नमुने व सूत्रे

Flexible budget (capacity 10,000 units at 100%; variable cost per unit: material ₹20, labour ₹10, variable overheads ₹5; semi-variable overheads ₹20,000 fixed + ₹3 per unit; fixed overheads ₹1,00,000):

Cost per unit falls as output rises because fixed costs are spread over more units.

५ महत्त्वाचे प्रश्न

Q1. What is a flexible budget?

A budget designed to change with the level of activity actually attained, showing costs at different capacity levels; it gives a fair comparison of actual cost with budgeted cost.

Q2. What is zero-based budgeting?

A method in which every activity and expense must be justified afresh from zero each budget period, instead of adding to last year's budget.

Q3. Prepare a flexible budget at 60%, 80% and 100% capacity from the data given above.

See the table above. Show the working of semi-variable overheads: at 60%, 20,000 + 6,000 × 3 = 38,000; at 80%, 20,000 + 8,000 × 3 = 44,000; at 100%, 20,000 + 10,000 × 3 = 50,000.

Q4. Explain the essentials and advantages of budgetary control.

Outline: essentials listed above with explanation; advantages – planning, coordination, control, efficiency, responsibility, cost consciousness; one example from a manufacturing unit.

Q5. Distinguish between a fixed budget and a flexible budget. Explain a cash budget.

Outline: fixed vs flexible on basis, activity level, comparison, suitability, revision; cash budget – purpose, receipts and payments method, month-wise format (opening balance, receipts, payments, closing balance), uses.

परीक्षेसाठी टीप

In flexible budgets, split semi-variable costs first and show the working below the table. Write the cost per unit row; it is often asked separately.

थोडक्यात सारांश

Standard costing (प्रमाण परिव्यय) sets in advance what a product should cost (material, labour and overheads) under efficient conditions. Actual costs are compared with these standards, and the differences, called variances, are analysed to find their causes and fix responsibility. It is a powerful tool of cost control.

महत्त्वाचे मुद्दे

• Standard cost is a predetermined cost based on technical study of material, labour and overheads.
• Steps: set standards → record actual costs → compare → calculate variances → find causes → take corrective action.
• A variance is Favourable (F) when actual cost is less than standard, and Adverse (A) when actual cost is more.
• Material variances: cost, price and usage (usage can be split into mix and yield).
• Labour variances: cost, rate, efficiency (and idle time).
• Overhead variances: expenditure, volume, efficiency, capacity.
• Causes of adverse material price variance: price rise, urgent purchases, poor buying. Adverse usage variance: wastage, poor quality material, unskilled workers.
• Causes of adverse labour rate variance: higher-grade workers used, overtime, wage rise. Adverse efficiency variance: poor supervision, machine breakdown, poor material.
• Management by exception: managers attend only to significant variances.

महत्त्वाच्या संज्ञा

• Standard quantity (SQ) – quantity that should be used for actual output.
• Standard price (SP) – price that should be paid per unit of material.
• Standard hours (SH) – hours that should be taken for actual output.
• Standard rate (SR) – rate that should be paid per hour.

नमुने व सूत्रे

• Material Cost Variance (MCV) = (SQ × SP) − (AQ × AP)
• Material Price Variance (MPV) = AQ × (SP − AP)
• Material Usage Variance (MUV) = SP × (SQ − AQ)
• Check: MCV = MPV + MUV
• Labour Cost Variance (LCV) = (SH × SR) − (AH × AR)
• Labour Rate Variance (LRV) = AH × (SR − AR)
• Labour Efficiency Variance (LEV) = SR × (SH − AH)
• Check: LCV = LRV + LEV (when there is no idle time)

(AQ = actual quantity, AP = actual price, AH = actual hours, AR = actual rate. A positive answer is favourable; a negative answer is adverse.)

५ महत्त्वाचे प्रश्न

Q1. What is a variance?

The difference between standard cost and actual cost. It is favourable when actual cost is lower and adverse when actual cost is higher.

Q2. What is management by exception?

A principle under which only significant deviations from standard are reported to management for action, saving managers' time.

Q3. Standard: 2 kg of material per unit at ₹50 per kg. Actual output 1,000 units; actual material used 2,100 kg at ₹48 per kg. Calculate material variances.

SQ for actual output = 1,000 × 2 = 2,000 kg.

Check: 4,200 (F) + 5,000 (A) = 800 (A). ✔

Q4. Standard: 3 hours per unit at ₹20 per hour. Actual output 1,000 units; actual hours 3,200 at ₹22 per hour. Calculate labour variances.

SH for actual output = 3,000 hours.

Check: 6,400 (A) + 4,000 (A) = 10,400 (A). ✔

Q5. Explain standard costing, its advantages and limitations.

Outline: meaning and steps; difference from budgetary control (unit level vs whole business); advantages (cost control, efficiency, pricing, responsibility, management by exception); limitations (setting standards is hard, standards get outdated, costly, may demotivate workers if too strict).

परीक्षेसाठी टीप

Always write the check line (MCV = MPV + MUV). It proves your answer and catches errors before the examiner does.