Calculations of Managerial Accounting 1)Accounting EquationAssets = Liability + Stakeholder’s EquityAssets: They are the things which are owned by the company.
They are many different types of Assets:Current Assets – Assets which are held in the form of cash, for their conversion into cash, for their consumption in the production of goods and services. Ex: – cash in hand, cash at bank etc.Fixed Assets – Which are held for the purpose of providing goods and services and those which are not held for resale in the business.
Fixed assets are of two types: -Tangible Fixed Assets – Which can be seen and touch physically. Ex: – land, building, plant and machinery etc.Intangible Fixed Assets- which cannot be seen and touched. Ex: – Goodwill, patent, trademark etc.Liabilities: Refers to the financial obligations of an enterprise other than owner’s funds. Liabilities maybe current liability and long-term liability.Current liabilities- Those liabilities which fall due for payment in a short period. (normally a period of not more than 12 months).
For Ex: – Bills Payable, outstanding expenses etc.Long term liabilities- Those liabilities which do not fall due for payment in a short period. (normally more than one year). For ex: – long term loans and debentures.2) Net Income Revenue – Expenses = Net Income Revenues – Amount charged for goods sold.Expenses – It is money spend in conducting business activities. For ex: salaries paid, rent etc.3) Cost of Goods SoldBeginning inventory cost+Additional Inventory- Ending Inventory= Equals to Cost of goods soldThey are of 2 types: -Direct cost – Production or purchase of product.
Indirect cost – Warehousing, equipment, labor etc.4) Contribution Margin Total sales – Total variable cost = Total Contribution MarginSales price – Variable cost per unit = Contribution Margin per unit.Manager’s 3 responsibilities 1) Planning – Settings goal and objectives and how to achieve them.Ex: Generate more sales, reduce labor costs etc.2) Directing – Overseeing company’s day to day operation’s.
Ex: Using daily sales reports to adjust marketing strategies etc.3) Controlling – Evaluating results of operations against plans and making adjustments as needed.Ex: Comparing budgeted sales with actual sales to take corrective actions.Objectives of Managerial Accounting1. Helpful in planning and policy formation – forecasting, setting goals and making policies on the basis of information.
2. Helpful in decision making – making decisions on cost, price, profit and saving.3. Helpful in controlling – Costing and budgetary.4.
Motivating to employee.Purpose of Managerial Accounting1. Costing out products, services and other items.2. Planning and controlling operations.3. Evaluating the performances of individual manager’s and different operational units.
4. Decision making.