Cima Defines Management Accounting As The Process Of Identification Accounting Essay

Accounting is the systematic or exact recording, reporting, and analysis of transactions and financial transactions of a company. Accounting also entails the creation of declarations or statements concerning the assets, liabilities, and outcomes of business operations.

CIMA describes Management Accounting as the process of identifying, measuring, calculating analyzing, analyzing, and interpreting information that management uses to manage, evaluate and monitor the operations of an organization and ensure the proper usage and accountability of its resources. One of the major differences between the two types in accounting is the fact that Management Accounting isn’t obligatory by definition, meaning that an organization can choose to perform as much or as minimal as it wishes and that there are no regulatory bodies or organizations that define what should be done, or in the end, whether any action is required at all.

The main purpose that management accounting has is to provide managers with an in-depth review of the expenditures and help them formulate strategies to improve profits.

Reduce costs. Costing is a process that is a link between management and financial accounting. Without the correct information about product costs, manufacturing, wholesale, or retail company could not separate the costs of selling and unsold products. Separation of costs is vital in order to measure profitability on a regular basis.

Introduction to finance

Finance is the science and art of managing cash. Everybody, including organizations, have the ability to raise funds or invest or spend money. Finance is the processes, institutions markets,s and instruments that are involved with the movement of cash between and among businesses, individuals, and the government.

In another way, finance can be described as managing the flow of money that an institution that includes a school, a corporation or bank, or even an agency of the government. Finance is concerned with the actual flow of money, and any claims against it.

The terms financial management, managerial finance corporate finance, and corporate finance are almost identical and can be frequently used interchangeably. The majority of the time.

Finance is often regarded as the vitality in the company unit. This is a function that involves the planning, procurement, and efficient use of the money of the company.

Relationship between finance and accounting

Accounting and finance are closely linked since accounting for financials is an area of accounting. Accounting involves the recording of the historical transactions of an organization and is the basis for preparing financial statements of the company which reveals what assets and obligations are owned by the business as of the day that the relevant time period, such as the year’s end i.e. Balance Sheet

Financial status is determined by the accounts documents (i.e. balance sheet or profit and loss account). Accounts keep track of the company’s income as well as expenditures, asset liabilities and evaluate those transactions, finance decides regarding investment, such as which investment area to choose? What is the amount of funds needed to invest? Etc. In a simplified form, we could say that when accounts end up with records, finance begins the process of analyzing these records.

The accounting process is closely linked to finance. Accounting is one of the most essential elements needed to make financial decisions. It also produces financial information. Accounting is a technique for dealing with only the aspects of financial operations. It is focused on the financial aspects of business in the sense that they can be measured in terms of financial values. The distinction between management and financial accounting is one of semantics however the gap between these two is closing rapidly. The term “financial management” encompasses the broad concept of controlling and planning every aspect of a business using financial methods Management accounting initially meant internal management of finances. The accountant focuses his attention on the gathering as well as the presentation of the financial information. The financial analyst analyzes the statements of the accountant, develops further data, and comes to conclusions based upon his analysis. In reality, good financial management is a requirement of good accounting

Financial and accounting are vital aspects of any company regardless of whether it is a profit-making or non-profit institution. It is a means by which an organization can analyze its operations in relation to the assets they own, how much is brought in, and what goes to where. This article delves more deeply into the financial and accounting processes in an organization as well as the challenges associated with these processes. The introduction section aims to understand the significance of finance and accounting, as well as the steps involved in each. The major discussion is centered on a deeper understanding of the issues encountered in the financial and accounting processes.

Business functions

The job of a company is often divided into two parts.1) Primary function 2.) secondary function

The primary function is a task of this kind that is essential to run an organization. The main job of a business may be divided into these sections

Function of Finance

Production function

Marketing function

Finance function: Finance is seen as the vitality for the unit of business. It involves the planning, purchasing, and efficient use of funds of the business. Without finance, it’s impossible to manage the business.

The productivity function process of production is to create or manufacture products or services through the use of human resources raw materials, capital, and capital. There are a variety of processes techniques, technologies, and methods are used for manufacturing. It includes plant layout and layout as well as plant construction production planning, as well as quality control. In the production aspect, it includes human resource functions as well as the finance part of the business. Because production is a key factor in the development of utilities, it is considered to be the primary job of a business.

Marketing functions: this job is usually associated with the marketing of manufactured goods or services. It is a part of the selling or sale of the item. In order to accomplish that, it utilizes finance and human resources. In order to ensure the smooth marketing of the product the marketing manager takes a final decision about the item, packaging, and branding, and decides on the distribution method and also advertising the sales in the future.

The second function of a business is accounting. If a business is an operation, it will have certain transactions that involve expenses and income. These transactions are part of the accounting of the business. The second part of the function is subdivided into these components

Analyze and collect information from transactions in the business.

Maintain transactions in accordance with the accounting system

Make financial statements.

The report should be sent to the other departments within the company.

Linking finance to other business functions

Management of finances is an important aspect of overall management. It isn’t a completely autonomous department. Finance is everywhere and is linked to the strategies and the results of each department’s functional areas because every plan and decision is a financial issue or influences the financial results. It is in close contact with accounting, economics, and also with other areas such as production, marketing human resource management, and quantitative methods.

Economic and financial markets:

The fields of economics and finance are linked. The definition of economics by economists is the study of the human’s behavior when it comes to producing, trading with, and the definition of the materials products, and services that the person wants. This definition is similar to the definition we use for finance. Finance can be described as the analysis of economic situations where you can place a rupee mark on the deal. In this sense, the term finance refers to an application of economics. Anyone who is interested in making financial decisions will benefit by having a solid foundation in economics. The connection between finance and economics is close. An analysis in the field of finance is most likely to be void should it be separated by the studies of economics. Financial management has, as a matter of fact, developed over the years into an independent branch of economics.

Marketing and Finance:

The financial management process is closely linked to marketing. When forming collections and credit policies for the company should consult with the marketing manager as these policies directly impact the size of sales made by the firm. Selling for credit, how much, and at what conditions are all part of the selling strategy of a company. They have financial implications also, as the funds that are to be held in receivables. They need to be available, and any change in policy could affect receivables. Therefore, this part of business management is a combination of finance and sales. Additionally, the financial manager must utilize the basic principles of marketing in deciding when to invest money in a particular business and also in finding out how to market bonds and stocks (R.M. Srivastava; 1986). The forecasts of marketing professionals The financial manager decides on the financial aspect that the predictions.

Production and Finance Function:

Financial management is also related to production processes. Any change in the production process could result in capital expenditures that the manager of finance must assess and also consider finance. The chief responsibility of the financial manager is providing funds to finance fixed assets and inventory, which have to earn enough to pay for the labor required to acquire the funds.

Management of human resources and finances:

Human resource management or the managing of investment in employees or in personnel is subject to significant financial implications. At the level of an organization, the finance manager has to determine whether it’s profitable to finance training programs for employees, or not.

Quantitative and Finance techniques:

The management of finances is also connected to quantitative methods. The study of finance in the modern age requires significant expertise in quantitative methods. Understanding statistical techniques can be particularly beneficial because financial decisions are based on observing relationships and taking action based on these relationships.


Debit (PS)

Credit (PS)

Stock 1.1


Fuel power





Bank cash at the counter


Carriage outward





Interest in debenture


Share capital


Reserve fund

Account for profit and loss appropriation

6% debenture























Trial Balance


The final stock at the end of the calendar year consisted of PS 30000.

Give Depreciation on buildings at 5%, and for machinery at 10%, and a provision for debts that are doubtful to be kept at 5% for all sundry debtors

The highest salary was PS2000. the wages were paid in advance for PS 3000

The Directors have decided to pay a 10 percent dividend on paid-up capital and to transfer PS10,000 to the reserve fund from the profits.


Debit PS


Credit PS

To stock 1-1

To buy

To fuel, power

To earn 20000 in wages

Less, pre-paid 3000

To gross profit C/d

To Depreciation






By sales

In closing the stock









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