Management by Objectives (MBO)

The latest development in the field of performance appraisal is appraisals by results. Results oriented appraisals are outcome of the modern management technique known as management by objectives (MBO). MBO has been described as a philosophy of management which seeks to minimize external controls and maximize internal motivations through joint goal setting between the managers and the subordinate and increasing the subordinates own control of his work. MBO can be described as process where by the superior and subordinate managers of an organizations jointly identify its common goals, define each individual's major areas of responsibility in terms of  results expected of him and use these measures as guides for operating the unit and assessing the contributions of each its members.'

Objectives:

• To foster the increasing competence and growth of the subordinates
• to serve as a device for organizational control and integration
• To measure and judge performance
• To serve as a basis for judgments about salary and promotion 
• To stimulate the subordinates motivation
• To classify both the job to be done and the exceptions of accomplishment
• To enhance communications between superior and subordinates.

The MBO process consist of following steps:

• Step 1: Joint Goal Setting 
• Step 2: Action Planning
• Step 3: Self Control
• Step 4: Periodic Progress Reviews

Concept of Leadership

Leadership is a personal quality of an individual. It is the ability to persuade others to seek defined goals enthusiastically. There leadership is an important attribute for the development and success of an organization. It is the manager in his leadership role who has to stimulate and inspire the employees to contribute willingly, cooperatively, and zealously to the optimum achievement of organizational goals.

According to Koonz and Weihrich,  "Leadership is defined as influence, that is, the art or process of influencing people so that they will strive willingly and enthusiastically towards the achievement of group goals".

According to Stephen Robbins, "Leadership is the ability to influence a group towards achievement of goals".

Leadership is not an easy term to define precisely. It can be defined as the process of influencing the subordinates so that they cooperate willingly in the achievement of the group goals. The objective of leadership is to influence so that important goal is achieved. 

It is clear from above definitions that leadership is the process of influencing behavior, activities and efforts of a group for achieving common goals. leadership process is a function of the ' leader', the ' follower' and other 'situational variables'.

Thus,  leadership is an important and necessary skill achieving individual, group and organizational performance.

Standard Costing

Standard cost is a scientifically pre-determined cost, which is arrived at assuming a particular level of efficiency in utilization of material, labor and indirect services. It is technical estimate for a selected period of time in a prescribed set of working conditions. It is built up from an assessment of the value of cost elements. It is a criterion cost, which may be used as yardstick to measure the efficiency with which actual cost has been incurred. Actual costs are historical cost, which has been incurred in the past wheres standard cost are future cost which are determined in advance, Standard cost is like a model, which provides basis of comparison for actual cost. This comparison of actual cost reveals very useful information for cost control.  

A standard cost should be based on sound technical and engineering studies, specified production methods, work-study and work measurement, clearly defined material specifications and price & wage rate projections. Thus standard cost are planned cost that should be attained under a given set of operating conditions. The main object of standard cost is to look forward and assess what the cost should be as distinct from what the cost has been in the past, Standard cost is primarily used for the following purposes:

• Establishing budgets
• Controlling costs and motivating and measuring efficiencies.
• Promoting possible cost reduction.
• Simplifying cost procedures and expecting cost reports.
• Basis for establishing bids and contracts for setting selling prices.

Concept of Personality

Personality is the major factor that influences individual behavior in an organization. To understand the behavior of an individual or a person, first it must be familiar about personality. By understanding the personality, behavior can be directly and controlled. Personality does not mean handsome and ugliness of human being. But it is the aggregate form if traits, qualities and features of an individual. It is concerned with reaction and interaction of individual and situation. Thus personality represents personal characteristics that lead to consistent patterns of behaviors. 

Personality can be measured in following ways: 

There are a number of tests and techniques, which attempt to measure personality;

• Observation: Observation a live situation has obvious benefits, however managers normally only observe a limited, edited performance, lasting between the 30 minutes of a typical interview.
• Situational tests: Waiting for behavior to our neutrality is very time-consuming. The situational tests save time by contriving an occasion for significant behavior to occur. 
• Questionnaire: Asking questions and checking his/her response and intelligence.
• Rating and checklists: To ask someone who knows the individual well.
• Protective tests: Assure that everything people do, say, write, think, paint or even dream reflects their personality. 

Evolution of Management Accounting

Modern business operates in rapidity changing and highly competitive environment. The recent wind of globalization, liberalization and privatization along with revolution in information technology has further increased the complexities in its operation. To lead business ahead successfully in the present environment, the management of an organization requires to be dynamic, aggressive, intelligent and painstaking.  

Efficient management process requires managers to plan, organised, direct, co-ordinate, motivate, control, report and communicate divergent activities pursued by an organization towards the attainment of organizational goal. They are to be based on systematic information. One of the major sources of managerial information in the accounting system maintained bye an organization.

Accounting is regarded as a formal mechanism for gathering, organizing and communicating information about an organization's activities. That is why accounting is often accepted as the language of business or as an information system. 

The uses of accounting information can be broadly divided into two categories:

• Internal parties or managers within the organization involved in different levels of management.
• External parties outsides the organization like present and potential investors, customer, employees, trade unions, security analysts, tax authorities, government, agencies etc.  

The three major branches of accounting that have been developed so far comprises:

• Cost Accounting
• Financial Accounting
• Management Accounting.

Meaning of Cost Accounting

Cost Accounting is a technique or process or system or method of recording costs relating to production of goods and services. In other words, cost accounting is a process of collection, classification and control over the cost. Collecting, classifying and controlling the costs are the main function of cost accounting. Cost accounting is regarded as a tool of management which is used for internal purpose of business. In other words, cost accounting is the special branches of accounting. It is developed due to limitation of financial accounting. The field of cost accounting has become broader with the passage of time. Besides serving the purpose of inventory valuation and pricing. Cost accounting serves the purpose of cost control, cost estimation and cost determination for a variety of managerial uses. Moreover, the scope of cost accounting has been extended to include the cost and control problems of non manufacturing business as well. Along with the realization of the usefulness of cost accounting, a systematic body of concepts, methods and procedures of cost accounting has been developed. 

Fixed Cost

Any organization need fixed cost which affect the company's overall activities. For production company, company should pay factory rent, management's salary, staff salary, office rent, electricity fee, etc where compnay's production zero also. So we can say that if there over production or under production company need certaion cost which can not destry is known as fixed cost.

For example: Production 10,000 Units

 Fixed Cost = $ 100,000

Production= 2,000 Units

Fixed Cost = $ 100,000

Here 10,000 production units need $ 100,000 fixed cost. and 2,000 units production also need same cost. So we can say that fixed cost is always same whether over production or under production. It is always same. It is fixed nature expenditure.

Company is selling larg volume or very low volume, fixed cost will be always same. Fixed cost always same it does not consider volume of production.

In summary, we can say that- The cost whose total amount will remain constant up-to certain range is known as fixed cost. It is also called burden cost or period cost or capacity cost. The amount of fixed cost is denoted  by "a' when the level of activity increases then per unit fixed cost decreases and vice-versa but never be zero.

In other words, fixed costs are those types of costs in which total amounts remain constant but per unit cost varies in each activity level.

Some features of fixed costs:

• Fixed cost never be zero even level of production is zero.
• If the level of production increases then per unit fixed cost decreases and vice-versa.
• Total amount of fixed cost will remain constant even level of production changes at certain stage.

Variable Cost

Variable cost is thoes cost which directly affect the volume of production. it is decreased when production unit is increased and it will be decreased when production unit is decreased. For example

Sales Unit: 5000

Variable Cost per Unit : $50

So Total Variable Cost = $ 250,000

Sales Unit: 4000

Variable Cost per unit: $ 50

So, Total variable cost= $ 200,000

So we can see that when production volume increased Total variable cost is high and when production volume decreased Total varibale cost also low.

 But one important thing which we should consider always that Per Unit variable cost is same. In total cost is difference but per unit it is fixed.

In summary, we can say that- the total cost which changes according to changes in level of production is known as variable cost. In other words, the total cost which increases if increases level of production and vice-versa. It is also called marginal cost or direct cost or circulating cost or running cost or out of pocket cost. When the level of production zero then total amount of variable cost also is zero. But per unit variable cost will remain constant at any level of out put and denoted by "b".

Variable costs are thoes types of costs which changes with in output. Some examples of variable cost are- Direct material cost, direct labor cost and direct expenses.

Some features of variable costs:

• Total amount of variable cost changes according to change in level of production. When level of production zero then total amount of variable cost also be zero.
• Per unit variable cost will remain constant at any level of activity.

Cost

We can divide cost it into two types. They are:

• Direct Cost
• Indirect Cost

Direct Cost

Direct cost is thoes cost is thoes cost which directly involved in manufacture and direct activities. for example to product finished goods, we need raw material, warehouses, custom & duties. similary we need management's salary all thoes elements which directly affect to make a product. It is also known as chargeable expenses as they are charged directly to the particular unit of cost concerned of direct expenses are as under:

• Hire of special machinery or equipment for a particular order or product.
• Cost of special layout, designs and drawings. 
• Maintenance cost of such equipment.
• Royalties related with production.

Indirect Cost

Indirect cost is thoes cost which not directly affect the cost but it need to finshed goods. for example we need administrative expenditure. selling and distribution cost. etc which is also indirect affect the production.

So indirect cost also play vital role to finish the product.

The cost which can not be directly absorbed by any goods and services and can not be easily measurable or identified to an unit cost is called indirect cost. It is also called overheads. It includes indirect material cost, indirect labor cost and indirect expenses.

We need both direct as well as indicect cost to make finish goods. after finishing goods we need to warehouse where our product will be safe at their intial position. It means without any damage finished goods will be at warehouse.

Cash Flow

Cash flow is essential part in Final Accounting. Each countries accounting standard board, it should follow. From Cash flow we can see clear picture of any organizations cash inflow and cash out flow during the period. From cash flow we can determine that how such companies cash strenght during the period. There are three activities. Cash flow is essential in financial report also.

• Operating Activities
• Investing Activities
• Finanncing Activities.

Operating Activities (Indirect Method)

Sales are the major sources of cash inflow and at the same time cash; non cash and non operating expenses are deducted  for finding out net profit of the company. That means , the net profit is already ascertained by profit and loss account. But the net profit is determined by considering non-funds or non- operating items, which may be either debited or credited to profit and loss account.

Operating Activities (Direct Method)

The determination of net cash flow from operating activities involves taking the items from accrual based income statement and carrying out necessary adjustments from balance sheet for calculation of cash receipt and cash payments. The components of cash from operating activities are:

• Cash sales and collection from costumers
• Cash purchases and payments to creditors 
• Cash payments for operating expenses such as salaries selling & distribution, administrative and others.
• Cash payment for interest
• Cash payment for tax.

Investing Activities

Investing activities is company's fixed assets purchase and sold during the period.

Finanncing Activities

Financing activities indicates company's shareholder's fund and long term debt's position (Increased or decreased) during the period. Financing activities are calculated the liabilities sides of balance sheet, such are share, debentures long term debts, retained earnings. 

So, cash flow indicates that whole company's cash activities during the period. So it give us clear picture of company's cash activities during the period.