Preface

Chapter 1 - The Role and Scope of Management Accounting

1. Meaning of Accounting 1
1.1 Functions of Management Accounting 1
1.1.1 Scope of Management Accounting 2
1.2 Management Accounting and Financial Accounting 2
1.2.1 Cost Accounting and Management Accounting 3
1.2.2 Objectives of Management Accounting 4
1.2.3 Limitations of Management Accounting 4
1.3 Recent Trends in Management Reporting 4
1.4 Methods and Techniques of Costing 5
1.5 Attributes of A Good Costing System 6

Chapter 2 – Cost Concept and Their Classifications

2.1.1 Costing 8
2.1.2 Cost units 8
2.1.3 Cost centre 8
2.1.4 Profit centre 8
2.1.5 Difference between Profit centre and Cost centre 9

2.2 Cost classification 9

2.2.1. By Nature or Elements 9
2.2.2 By Functions 9
2.2.3. By Degree of Traceability to the Product 9
2.2.4. By Changes in Activity or Volume 9
2.2.5. Association with the Product 10
2.2.6. By Controllability 10
2.2.7. By Normality 10
2.2.8. By Relationship with Accounting Period 10
2.2.9. By Time 11
2.3 Elements of Cost 11
2.3.1 Materials 12
2.3.1.1 Direct Materials 12
2.3.1.2 Indirect Materials 12
2.3.2 Labour 12
2.3.2.1 Direct Labour 12
2.3.2.2 Indirect Labour 12
2.3.3 Expenses 12
2.3.3.1. Direct Expenses 12
2.3.3.2 Indirect Expenses 12
2.3.4. Overheads 12

Chapter 3- Accounting for Materials or Inventory Control

2.1 Definition 13
2.1.1 Inventory Control (Material Control) 13
 2.2 Objectives of Inventory Control 14
2.3 Material Control Process 14
2.3.1 Purchasing 14
2.3.1.1 Methods of Purchasing 14
2.3.1.2 Purchase Procedure 14
2.3.1.3 Procurement Documentation 15
2.3.2 Receipt 15
2.3.3 Storage 16
2.3.3.1 Functions of Store-Keeping 16
2.3.3.2 Organization of Stores Department 16
2.3.3.3 Techniques of Inventory Control 17
2.3.4 Issue 25
2.3.4.1Issue Procedure 25
2.3.4.2 Bill of Materials 26
2.3.4.3 Material (Stores) Requisition Note 26
2.3.4.4 Bin Card 27
2.3.4.5 Stores Ledger 27
2.3.4.6 Difference between Bin Card and Stores Ledger 28
2.3.4.7 Method of Pricing of Material Issues 28
2.4 Reasons for Surpluses and Deficiencies 30
2.4.1 Accounting of Surpluses and Deficiencies 31
2.4.2 Accounting of Material Losses 32

Chapter 3- Accounting for Labour

4.1 Labour Cost 34
4.2 Classification of Labour Cost 35
4.2.1 Direct Labour Cost 35
4.2.2 Indirect Labour Costs 35
4.3 Accounting and Control of Labour Cost 35
4.4 Methods of Recording Time 36
4.4.1 Time Recording 36
4.4.2 Time-Keeping 36
4.4.3 Time-Booking 37
4.4.4 Method of Time-Booking 37
4.5 Attendance and Payroll Procedure 37
4.5.1 Preparation of Payrolls 37
4.6 Overtime 38
4.6.1 Causes of Overtime 38
4.6.2 Disadvantages of Overtime 39
4.6.7 Treatment of Overtime premium in Cost Accounting 39
4.6.8 Steps for Controlling Overtime 39
4.7 Idle Time 39
4.7.1 Causes of idle time 39
4.7.2 Accounting Treatment of Idle Time 40
4.7.3 Control of Idle Time 40
4.8Labour Turnover 41
4.8.1 Causes of Labour Turnover 41
4.8.2 Effects of Labour Turnover 41
4.8.3 Costs of Labour Turnover 42
4.8.4 Remedial steps to minimize labour turnover 42
 4.8.5 Treatment of Labour Turnover 42
4.9 Labour Remuneration System 43
4.9.1 Objectives of an Ideal Remuneration System 43
4.9.2 Principles of an Ideal Remuneration System 43
4.9.3 Basic Methods of Remuneration System 43
4.10 Incentive Schemes 45
4.10.1 Classification of Incentive Schemes 46
4.10.2 Indirect Monetary Incentive Schemes 50
4.10.3 Other Non-Monetary Incentive Schemes 51
4.10.4 Miscellaneous Topics 52

Chapter 5 – Accounting for Factory Overhead

5.1 Definition 54
5.2 Collection of Overheads 55
5.3 Classification of Overheads 55
5.3. 1. Functional Analysis 55
5.3.2. Behavioral Classification 56
5.3.3 Methods of segregating costs 56
5.4 Allocation and Apportionment of Overheads 58
5.4.1 Allocation of Overheads 58
5.4.2 Apportionment of Overheads 59
5.4.2.1. Primary distribution of overheads 59
5.4.2.2. Re-apportionment of service department overheads 59
5.4.2.3 Methods of Re-apportionment or Re-distribution 60

Chapter 6 – Cost Behavior and Break Even Analysis

6.1 Definition 62
6.1.1 Objectives 62
6.2 Techniques of CVP Analysis 62
6.2.1 Contribution Margin Analysis 62
6.2.2 Importance or uses of Contribution 63
6.2.3 Difference between Profit and Contribution 63
6.2.4 Break Even Analysis 63
6.2.5 Marginal Cost Statement 63
6.3 Assumptions underlying BEP or CVP Analysis 64
6.3.1 Advantages 64
6.3.2 Limitations 64
6.4 Break Even Point 64
6.4.1 Calculation of B.E.P 64
6.4.1(a) Algebraic Method 64
6.4.2 (b) Margin of Safety 65
6.4.3 (c) Profit Volume Ratio 65
6.4.4 Break Even Chart 65
6.4.5 Calculation of Break Even Chart 66
6.4.6 Angle of Incidence 66
6.5 Types of Break Even Chart 66
Chapter 7 – Variable and Absorption Costing
7.1 Definition 68
7.1.1 Absorption Costing 68
7.1.2 Variable Costing 68
7.1.3 Objective of Absorption Costing 68
7.2 Differences 68
7.2.1 Valuation of Closing Stock 69
7.2.2 Impact 69
7.2.3 Effect 70
7.2.4 Limitations of Absorption Costing 73
7.3 Presentation of Data 73

Chapter 8 – Relevant Cost for Decision Making

8.1 Definition 74
8.1.1 Relevant costs are future cash flows 75

8.2 Management Decisions Involving Following Alternatives 76

8.2.1 Make-or-Buy Decision 76

8.2.2 Sell - or-Process-Further Decision 77

8.2.3Decision to Add or Drop Product Line 78

8.2.4Scarce Resource Utilization Decision 79

Chapter 9 – Budgeting and Budgetary Control

9.1 Definition 80
9.2 Features of Budget 80
9.2.1 Meaning and definition of Budgeting 81
9.2.2 Definition of Budgetary Control 81
9.2.3 Elements of budgetary control 81
9.2.4 Objectives of Budgetary Control 81
9.2.5 Installation of Budgetary Control 82
9.3 Purpose or Uses of Budgets 83
9.4 Classification of Budgets 83
9.4.1 Classification according to time factor 83
9.4.2 Classification according to Function 83
9.4.3 Classification according to Flexibility Factor 84
9.5 Limitations or Problems associated with Budgeting 85
9.6 Factors for determining the budget period 85
9.7 Master Budget 85
9.7.1 Components 85
9.7.1 Operational Budget 85
9.7.2 Financial Budget 86
9.8 Order of components of master budget 87