Advantages of working capital Working capital is the life blood and nerve centre of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantages of adequate working capital are as follows:- 1. Solvency of the business : Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. 2. Goodwill : Sufficient working capital enables a business concern to make prompt payment and hence help in creating and maintaining Goodwill. 3. Easy loans : A concerns having adequate working capital, high solvency and good credit standing can arrange loans from banks and others on easy and favorable terms. 4. Cash discount : Adequate working capital also enable a concern to avail cash discounts on the purchase and hence it reduces costs. 5. ...

Factors determining the working capital requirements The working capital requirements of a concern depend upon a large number of factors such as nature and size of business, the character of their operations, the length of production cycles, the rate of stock turnovers and the state of economic situation. It is not possible to rank them because all such factors are of different importance and the influence of individual factors changes for a firm over time. However the following are the important factors generally influence the working capital requirements: 1. Nature or character of business : The working capital requirements of a firm basically depend upon the nature of it's business. Public utility undertakings like Electricity, water supply and railways need very limited working capital because they offer cash sales only and supply services, not products, and as such no funds are tied up in inventories and receivables. On the other hand trading and financial firm's require l...

Objectives of Management Accounting The primary objective of management accounting is to enable management to maximize profit or minimize losses. This is done through the presentation of statements in such a way that management is able to take correct policy decision. Followings are the important Objectives of management accounting : (1) Planning and policy formulation : The object of Management accounting is to supply necessary data to the management for formulating plans. Planning is essentially related to taking decision for future. It also includes forecasting, setting goals and deciding alternative course of action. Management Accountant prepared statements of past results and gives his preference for a particular alternative. The figures supplied and opinion given by the management accountant help management in planning and policy formulation. (2) Helpful in controlling performance : Management accounting devices like standard costing and budgetary control are helpful in controll...

Scope of management accounting Management accounting is anew approach to Accounting. It provides techniques for the interpretation of Accounting data. It also helps in Developing realistic approach  to future course of action. The main Aim is to helps management in it's functions of planning, directing and Controlling. Management accounting is related to a number of fields. At the seven International Conference of accountant held in Amsterdam in 1957, the main emphasis was on cost accounting, Budgetary control, material control, interim Reporting, Determination of the most efficient and economical accounting system, Special cost and Economic studies and  assessing management in interpreting financial data. The following facts of management accounting are if a great significance and firm the scope of this subject. (1) Financial Accounting : Financial Accounting deals with the historical data. The record facts about an organization is useful for planning the future course of act...

Distinction between partnership and company These are the following differences between  partnership and company:- (1) Regulating Act : A Company is regulated by companies Act, 2013, while a partnership firm is governed by the Indian Partnership Act, 1932. (2) Registration : A company can not come into existence unless it is registered, whereas for a partnership firm registration is not compulsory.  (3) Number : The minimum number in a public company is seven and in case of a private company two. In case of partnership is two. The maximum number of members in case of a private company is two hundred but in case of a public company there is no such maximum number of Member. In partnership the number should not exceed twenty, while in case of banking business, it should not exceed ten.  (4) Liability : In case of joint stock company the liability of shareholders is limited (except in case of unlimited companies) to the extent of face value of shares or to the extent of guar...

Management Accountings management accounting is comprised of two  word management and Accounting .it is the study of managerial aspect of Accounting. the emphasis of management Accounting is to redesign Accounting in such a way that it is helpful to the management in formation of policy , control  of execution and appreciation of effectiveness. it is that system of accounting which helps management  in carrying out it's functions more efficiently.    Definitions Anglo-American Council on Productivity - "maccounting is the presentation of  Accounting information in such a ways as to assist management in the creation of policy and the day-to-day operations of an undertaking."  Characteristics of nature of management Accounting These are the following important features of management Accounting :- (1) Providing accounting information : Management accounting is based on accounting information. The collection and Classification of data is the primary functi...

Budgetary control A system which uses budgets as a means of planning and Controlling all aspects of producing or selling commodities and services. Elements of Budgetary control These are the following elements of Budgetary control:- (1) Organisation for budgetary control :  The proper Organisation is essential for successful preparation of maintenance and administration of budgets. (2)  Budget centres : A Budget centres is that part of  organisation  for which the budget is prepared. A budget centres may be a department, section of department or any other part of the department. (3) Budget Manual : A Budget Manual is a document which spell out the duties and also the responsibilities of various executives concern with the budget. It specified the relation among various functionaries. (4) Budget officer : The he chief executive who is the top of the organization, appoint some persons or budget officers. (5)  Budget committee : In small scale concerns the accounta...

Budgetary control Introduction  Budgetary control is the process of determining various budgeted figures for the enterprises for the future period and then comparing the budgeted figure with the actual actual performance for calculating variances if any. First of all budgets are prepared and then actual performance are record. The comparison of budgeted and actual figure will enable the management to find out discrepancies and take remedial measures at a proper time. The budget control is a continuous process which help in planning and Coordination. It provide a method of control too. A budget is a mean and the budgetary control is the end result. Definitions "A system which uses budgets as a means of planning and Controlling all aspects of producing and/or selling commodities and services" Process of Budgetary control From the above definitions it is clear that the budgetary control involves the following :- The objects are set by preparing budgets. The business is divided i...

Advantages/ needs or Importance of Management accounting These are the following advantages of management accounting:-  Increase efficiency Proper planning Measurement of performance Maximizing profitability Improves service to customers Effective management Control (1) Increase efficiency : Management accounting increase efficiency of the business operations. The targets of different departments are fixed in advance and achievement of these goals is a tool for measuring their efficiency. (2) Proper planning  : Management is able to plan various operations with the help of accounting information. The techniques of budgeting is helpful in forecasting various activities. Budgeting are prepared department wise firstly and then a master budget is prepared for the whole Organizations. The work load of each and every individuals is fixed in advance. The activities of the concerns are planned in a systematic manner. (3) Measurement of performance : The system of budgetary control and...

Management accounting Management accounting is concerned with the accounting information that is useful to management Limitations of Management accounting These are the following limitations of Management accounting :- Based on Accounting information Lack of Knowledge Intuitive decision Not an alternative to administration Top heavy structure Evalutionery stage personal basis Psychological resistance (1) Based on Accounting Information : Management accounting is based on data supplied by financial and cost accounting. Historical data used to make future decision. The correctness and effectiveness of managerial decision will depend upon the quality of data on which these decisions are based. (2) Lack of knowledge : The use of management accounting requires the knowledge of a number of related subjects. Management should be conversant with accounting principles, statistics,etc. and only the management can be effectively utilised. Deficiency in knowledge of any of these subjects limits th...

Management accounting Management accounting is the adoption and analysis of accounting information and it' s diagnosis and explanation in such a way as to assist management. Objectives of Management accounting These are the following important objectives of management accounting  :- (1) Planning and policy formulation : The object of Management accounting is to supply necessary data to the management for formulating plans. Planning is essentially related to taking decision for future. It also includes Forecasting, setting goals and deciding attractive course of action. (2) Helpful in controlling performance : Management accounting devices like standard costing and budgetary control are helpful in controlling performance.  The work is divided into different units and separate goals are set up for each units. The object of Management accounting is to make Control over the performance. (3) Helpful in Organizing : Organizations is related to establishment of relationship among dif...

Introduction and Meaning The term  'Financial analysis' also known as analysis and interpretation of Financial statement  refers to the process of determining financial strength and weakness of the firm by establishing strategies Relationships between the item of the balance sheet, profit and loss Account and other Operative data. "Analysing financial statement" according to Metcalf and titard, is a process of evaluating the Relationships between components part of financial statement to obtain a better understanding of a firm's position and performance. Definitions In the word of Myers , "Financial statement analysis is largely a study of relationship among the various financial factors in a business as disclose by the single set of statement, and a study of trend of these factors as shown in a series of statement". The purpose of financial analysis is to diagnose the information contained in financial statement so as to judge the profitability and fina...

Functions of management accounting Management accounting is a part of accounting. It has developed out of the need for making more and more use of accounting for taking managerial decision. Management is assign the function of classification, presentation and interpreting data in such a way that it helps management in controlling and running the enterprises in an efficient and economical manner. Functions These are the following functions of management accounting :-  (1) Planning and forecasting : Management fixed various targets to achieve by the business in near future. Planning and forecasting are essential element for achieving business objectives. One of the important function of the Management accounting is to keep management in planning of short- term and long term period and also in making forecast for future. (2) Modifications of data  : Management accounting helps in modifying accounting data. The information is modify in such a way that it becomes useful for the man...

Management accounting. Management accounting is the adoption and analysis of accounting information and it's diagnosis and explanation in such a way as to assist Management. Scope of management accounting Management accounting is a new approach to accounting. It provide techniques for the interpretation of accounting data. It also help in Developing realistic approach to future course of action. It's main Aim is to help management in it's function of planning, directing and controlling. Scope of management accounting (1) Financial accounting  :  Financial accounting deals with the historical data. The revised facts about an organization is useful for planning the future course of action. Though planning is always for the future but still it has to be based on past and present data. The control aspect too is based on financial data. The performance appraisal is based on recorded fact and figures. so management Accounting is closely related to financial accounting. (2) Cost a...

Management accounting Management accounting is that adoption and analysis of accounting information and it's diagnosis and explanation in such a way as it to assist management. Features or Characteristics of Management accounting These are the following features of Management accounting:- (1) Providing accounting information  :  Management accounting is based on accounting information. The collection and classification of data is the primary function of accounting department. The information so collected is used by the management for taking policy decision. Management accounting involves the presentation of information in a way it suits managerial needs. (2) Cause and effect analysis  :  The cause and effect relationship discussed in management accounting. If there is loss the reason for loss is probate. If there is profit  the factors directly influencing the profitability are also studied. (3) Use of special techniques and concept  : Management accounting...

What is management accounting? Management Accounting introduction and meaning Management accounting is comprised of two words 'management' and 'accounting'. It is the study of managerial aspect of accounting. The emphasis of management accounting is to redesign accounting in such a way that it is helpful to the management in formation of policy, control of execution and appreciation of effectiveness. It is that system of accounting which helps management in Carry out it's function more efficiently. Robert N. Anthony-    "Management accounting is concerned with accounting information that is useful to management". T.G Rose-   " Management accounting is the adoption and analysis of accounting information and it's diagnosis and explanation in such a way as to assist management".