Management Accounting

Capital expenditure versus Revenue expenditure

Capital expenditure
Revenue expenditure
1) It is an expenditure which is incurred in order to increase the earning capacity of the business.
 2) The amount that are received by way of sale of fixed assets.
3) This is non recurring in nature.
4) E.g.: Sale of plant, machine, building, furniture.
1) It is an expenditure which is incurred in order to maintain the day to day affairs of the business.
2) The amount which are received due to the sale of goods.
3) Recurring in nature.
4) E.g.: Sale of goods, interest recurred are examples.

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What are the generally accepted Accounting principles

1. Business entity concept
2. Money measurement concept
3. Gang concern concept
4. Cost concept
5. Pual Aspect concept
6. Revenue Realization concept
7. Accrual concept
8. Accounting period concept

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Cost Accounting vs Management Accounting

Cost Accounting
Management Accounting
1) Objectives if this is to ascertaining and control of costs of products & services.
2) It concerned with the Department or division of the business.
3) The scope of this is limited.
4) It uses Quantitative aspect is recorded.
5) It uses past and present figure.
1) Objectives of MA is to help the management in decision making, planning, control etc.
2) It deals with the both cost and revenue
3) The scope of this is wider.
4) It uses Quantitative and Quantitative information.
5) It is prepared for providing future guidelines.

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Distinguish between management accounting and financial Accounting

Management Accounting
Financial Accounting
1) Objectives if this is to provide information to internal use of management.
2) It concerned with the Department or division of the business.
3) It concerned with future plans and policies.
4) It is optical.
5) It is based on judgement.
1) Objectives if this is to provide information to Creditor, Government, Shareholders etc.
2) It concerned with the overall performance of the business.
3) Recording of past events.
4) It is compulsory.
5) It is based on

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What are the Scope and function of management Accounting?

Scope: 

  1. Financial Accounting
  2. Cost Accounting
  3. Budgetary control
  4. Inventory control
  5. Reporting
  6. Statistical methods
  7. Taxation methods and procedure
  8. Internal Audit. 

Functions:

  1. Forecasting, 
  2. Organizing, 
  3. co-coordinating 
  4. Controlling
  5. Analysis and interpretation
  6. Communicating
  7. Economic appraisal.

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Define Management Accounting. What are the objectives of Management Accounting?

“Management Accounting is concerned with accounting information that is useful to management”

 “Management Accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and in the day to day operation of an undertaking” – AACP.

1) To assist the management in promoting efficiency ie service to customer, investors and employees. 2) To prepare budgets covering all functions of business (ie production, sales, research and finance) 3) To analyze monetary and non-monetary transaction.
4) To compare the actual performance with plan of identifying deviation and this causes.

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