What do you mean by management accounting?

♦ Management Accounting refers to an accounting by managers. also known as managerial accounting . It provides information to internal users. these are employees, employer, banks, managers and etc.

♦ In simple words , where managers perform all the accounting related to management of the organization . and provide further  information to internal users and helps in making and taking decision and if any deviation then to correct and to achieve in future known as Management Accounting  .

Management Accounting

Definition of Management Accounting

♦ Any form of accounting which enables a business to be conducted more efficiently can be regarded as management accounting.

Nature Of Management Accounting

01.  Selective nature : Financial accounting gives many information in the form of Profit and Loss account and Balance sheet but management accounting provides only those information which are useful to achieve the objective.

02 . Decision Making : management accounting helps the organization in making better decision making . which helps out the organization in controlling their activities and if their any deficiency then to make decision and to fill it out in the future .

03. Useful to Management : Management Accounting is also helpful as it provides the necessary information, description etc. to management Which is also helpful in guiding the line of action towards control of destiny of a undertaking .

04. Related to Future : Under management accounting all decision are taken related in concern with future . as it deals in measuring and analyzing past comparative financial data pertaining to current and previous financial years . When the future turns into present , the same is also critically analyzed .

05. Analysis and Interpretation  of Data : Management Accounting refers to managerial accounting i.e., where managers after making all book of accounts . helps the organization in analysis and interpretation of financial data . As to make or predict the future and taking corrective actions and measures .

06. Integrated Cost : In Management Accounting, the techniques of cost accounting, financial Accountancy, financial management, statistics, Economics, etc. are used . Therefore, this is an Integrated Cost.

Scope of  Management Accounting

Management Accounting has to serve management in  a broader form . it includes presentation of accounting data , financial analysis and interpretation .

Scope of management accounting includes the following :- 

1. Financial Accounting : Management  Accounting can not obtain full control and coordination of operations without proper accounting system . Trading and Profit and Loss account , Balance sheet and other necessary items are used for future planning and forecasting .

2. Cost Accounting : Cost Accounting is a method to ascertain cost . it is used for controlling the production costs, to find out the costs pertaining to undertaking and processes , and find out the cost of the product at every stage . It is helpful towards controlling the internal behavior and management of any business setup .

3. Statistics : it is required for the supply of statistical data . various techniques of statistics like trend analysis , interpolation and extrapolation , regression analysis etc. are used to analyze the data.

4. Tax Accounting : A necessary report pertaining to various taxes imposed by central and state governments like Income tax, sales tax, Excise duty etc. are prepared .

5. Budgetary Control : Budgeting assisting in identifying responsibility and ensuring coordination . budgetary control involves the preparation of budget and measuring the actual result against budgeted performance .

6. Cost Control : After completion of the work , the planned data and the real data are compared to find out the deviation so that the necessary control could be done . Planned costs and Budgetary control techniques are also used to find out the deviations. it includes inventory control , cost control , time control , budgetary control and variance analysis etc.

Functions of Management Accounting 

functions of management accounting are as follows:- 

1. Recording of data: – The recording of business transaction should be in such manner that the top management doesn’t require to rely on old data .

2. Accuracy of data:- if the data is complete and true, then the analysis and interpretation can be accurate,  and policy making and decision is further based on such analyzed data.

3. Helpful to management : – The management accounting helps towards the conclusion of work by the management.

Some others includes as communication of data , helpful in planning and forecasting , helpful in organization , and helps in coordination .

Limitations of Management Accounting

limitations of management accounting includes :-

1. Based on Financial and Cost Accounting

2. Lack of Knowledge and Understanding of the related Subject.

3. Management Accounting does not provide Decision.

4. Management Accounting is  not Alternative of Management .

5. Continuity and participation.

6. Human opinion or Lack of Objectivity.

7. heavy and costly Structure.

8. persistence on intuitive decision making.

Author Bio

Qualification: Graduate
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Location: jodhpur, Rajasthan, India
Member Since: 25 Sep 2021 | Total Posts: 2
I am Rahul Chaudhary living in jodhpur , Rajasthan I am content writer at quora.com with 4.2k monthly viewers . My book on Management Accounting ( important questions and practicals ) is also in a way to be published soon . View Full Profile

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October 2021