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Course Description

The basic theme of this course is equipping the managers with tools to take decisions based on analysis of accounting information to ensure controlled performance. The two tools of financial statement analysis viz., ratios and cash flow statement are discussed. The students learn the distinction between financial accounting and management accounting and appreciate the process of decision-making and basic managerial decisions of Cost-volume-profit (CVP), product costing, and pricing and short term operating decisions. The course ends with control techniques of budgeting.


Learning Outcomes

Upon the successful completion of the unit, the student should be able to:

1.      Explain the need for ratio analysis and work out various ratios.

2.      Draft a cash flow statement of the business.

3.      Understand the process of decision-making used by managers using financial information & tools of management accounting. The student should be able to differentiate between financial accounting and management accounting.

4.      Explain the cost behavior and how the managers use cost-volume-profit analysis.

5.      Explain how to find out product costs using absorption and contribution formats.

6.      Understand activity based costing and why it calculates product costs in a better manner.

7.      Use relevant information in making pricing decision and certain short term operating decisions.

8.      Understand the importance of budgets and how they are prepared

9.      Understand the difference between fixed and flexible budget, technique of preparing the flexible budget and how to carry out variance analysis.


 Course Contents

      Ratio Analysis meaning, uses, calculation and interpretation.

      Cash flow statement meaning, uses & preparation

      Managerial accounting: Need and process of decision-making.

      Cost behavior and cost-volume-profit analysis.

      Product costing Absorption and variable costing.

      Activity based costing.

      Pricing and other short term operating decisions.

      Control and budgeting process.  



Indicative Reading

Core Text

A.     Wood, Frank & Sangster, Alan (1999), Business Accounting I, 8th Edn. Pitman Publishing. (Also used as core text for ACC-101)

B.     Horngren, Charles T., Sundem, Gary L. and Stratton, William O. (2000), Introduction to management accounting, 11th Edn. Prentice Hall of India.

Reference Books

1)       Drury, Colin (1996), Management and cost accounting, 4th Edn, International Thompson Press.

2)       Larson, Kermit D. and Pyle William W. (1998), Fundamental Accounting Principles, 11th Edn, Irwin, Homewood, Illinois-60430.

3)       Arnold, John and Turley, Stuart (1996), Accounting for management decisions, 3rd Edn, Prentice Hall.

4)       Watts, John (1996), Accounting in the Business Environment, 2nd Edn, Pitman Publishing.


Internet Sources Ch11CVPandCh4JobCosting.doc



Power Point Slides


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