J. Batty defines Management Accounting as “the term used to
describe the accounting methods, systems and techniques which coupled with
special knowledge and ability, assist management in its task of maximizing
profits or minimizing losses”.
Scope of Management
Accounting
The Management Accounting includes the following fields /
scope of activities:
1)
Financial Accounting: Financial accounting is
the basis for Management accounting. Therefore, there must be a properly
designed financial accounting system. Otherwise, the management cannot obtain
full control and co-ordination of activities.
2)
Cost Accounting: The costing techniques like
standard costing, budgetary control, marginal costing, opportunity costing
etc., play a vital role in the creation of policies and the operation of the
undertaking.
3)
Statistical Methods: The statistical tools like
graphs, charts etc., help the management to understand the facts clearly. The
statistical methods are also useful for drawing up plans and conclusions
without waste of time and energy.
4)
Internal Control: Internal control systems like
internal check, internal audit and inventory control etc., ensure accurate
information which is useful for making correct decision.
5)
Office Operations: The office services which
include maintenance of proper data processing and other office management
services are also useful to the management in carrying out its functions.
6)
Legal Provisions: The management decisions
depend on various rules and regulations.
Functions of
Management Accounting
The basic function of Management Accounting is to help the
management in carrying out its function effectively. This basic function
involves the following other activities:
1)
Providing the Data: The management accountancy
provides the necessary data for the drawing up of it plans.
2)
Modification of Data: Th management accountancy
compiles and classifies the data properly for decision making.
3)
Analysis and Interpretation of Data: In order to
make the data more meaningful to the management, the accounting data is
analyzed by means of comparative statements, ratios and percentages, cash flow
and fund flow statements.
4)
Means of Communication: The Management
accountancy serves as a means of communication by expressing the effectiveness
of organizational capabilities and methods of carrying out plans.
5)
Facilitating Control: The Management Accounting
enables the management to control the organization by fixing the goals and the
time limits for their attainment. In any system of control, the standard of
performance and the analysis of variations therefrom are essential. This is
made possible in management accountancy through budgetary control and standard
costing.
6)
Qualitative Information: The financial data
alone is not sufficient for the management for decision making. It may require
some other information which is not capable of being expressed in terms of
money. Such information like statistical compilation, minutes of meetings,
engineering records etc., are also collected in management accounting.
Thus, these are the scope and functions of Management
Accounting for assisting management to maximize profit and control cost and
loss.
To know more about Definition, Objectives & Tools of
Management Accounting, you can have a visit @ https://subramoneyplanning.blogspot.com/2019/10/management-accounting-definition-objectives-tools-used.html
To know more about Advantages and Disadvantages of Management Accounting, please do visit @ https://subramoneyplanning.blogspot.com/2020/08/advantages-and-disadvantages-of-management-accounting.html
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