Definition: We can refer to Management Accounting as an accounting system that provides information to perform management functions directed toward achieving organizational objectives. If we emphasize the keyword, it is explanatory to denote the managerial aspect of accounting. Besides, it has a differentiated lookout directed towards decision-making and control. It … [Read more...] about Management Accounting and its Functions
Accounting
Cash Budget
Definition: Cash Budget is a precise statement depicting anticipated projections about the cash receipts and payments for a specific time period. It is a type of functional budget that is useful for cash management in the organization. A cash budget is essential for companies and is referred to as the "Nervous System of Budgetary Control". Also, it is alternatively known as … [Read more...] about Cash Budget
Zero-based Budgeting
Definition: Zero-based Budgeting or ZBB is an analytical budgeting method where the preparation of a budget begins by assuming the base as Zero. In this, the overall process starts from scratch every time while preparing budgets. In 1962, Peter Phyer introduced this approach of ZBB. It turned out to be an excellent tool in the field of management. This approach uses … [Read more...] about Zero-based Budgeting
Budgetary Control
Definition: Budgetary Control is a system of control that focuses on cost management with the help of budgets for Departmental and Organizational levels. It begins with budget preparation as per employees' responsibilities, thereafter comparing the actual and planned outcomes and ends with variance analysis followed by a review. In brief, we can understand it as a road map … [Read more...] about Budgetary Control
Flexible Budget
Definition: Flexible budget is the one that changes with the level of Activity/Output rather than for any specified activity level. It includes the preparation of multiple budgets that depict budgeted costs for various activity levels. The flexible budget supersedes the limitations of a fixed budget. Because it is a practical approach that is suitable for dealing with … [Read more...] about Flexible Budget
Absorption Costing
Definition: Absorption Costing is the oldest technique for estimating profit/cost per unit for Goods and Services. More precisely, it is a technique to determine the cost or profit of the manufactured products. Here, production is taken as the base for the profit calculation. It identifies and combines all the production costs, whether Variable or Fixed. After that, … [Read more...] about Absorption Costing
Single Entry System
Definition: Single Entry System is the hybrid and unscientific bookkeeping method that partially records business transactions. More precisely, it records only a single aspect of the financial transactions and excludes the idea of duality. Small businesses generally use this system of bookkeeping. Because these businesses can't afford to hire a professional accountant for … [Read more...] about Single Entry System
Internal Reconstruction
Definition: Internal reconstruction is the rearrangement of the company's existing capital structure. More precisely, it involves a change in the financial structure by Alteration or Reduction. The reorganization takes place without liquidation. So, there is no need to dissolve the existing venture. Thus, the formation of a new company is not needed. An internal … [Read more...] about Internal Reconstruction
Differential Costing
Definition: Differential costing is a technique that examines changes in the total cost and revenue by analyzing proposed alternatives. These changes comprise an increase/decrease in the cost of crucial elements affecting decision making. The need for comparative study is to analyze the difference in the cost due to the change in operations. It involves cost differences by … [Read more...] about Differential Costing
Fund Flow Statement
Definition: Fund Flow Statement summarises the movements of funds in the business between the two accounting periods. It provides analytical data about the procurement and utilization of funds. It is a technique that studies, control and monitors the number of changes in the funds during a period. One can judge whether the funds are efficiently utilized in the business or … [Read more...] about Fund Flow Statement