what is the meaning of management accounting
Management accounting is an accounting method that provides necessary statistical information to help in management work. Managerial accounting is made up of two words management + accounting. First-term management is a broad term. Management is a method of getting work done by another person or is done by working together with people and management is a science and art through which the manager achieves his set objectives. The second word is accounting, whose main function is to record the facts which helps in management work. Therefore, accounting which is used as a management tool to increase managerial efficiency is called management accounting.
The nature of management accounting can be explained as follows-
(1) Achievement of objectives - In managerial accounting, accounting information is used in such a way that the objectives of the organization can be achieved. Thus, historical data is used while planning objectives. By comparing the prescribed parameters and achievement of work, information is obtained about the performance capacity of different departments.
2 Selective nature – Managerial accounting is selective in nature. Under this, the best plans and most profitable options are selected after analysis and comparative study.
(3) Being related to the future – The decisions of accounting management accounting are for the future. Under this, the present data is compared with the past and if there is any kind of problem or error, efforts are made to remove it in the future and many predictions are made to achieve the objective.
(4) Use of special techniques and concepts - To make the accounting data more appropriate, special techniques and concepts are used in managerial accounting and under this, techniques like financial planning and analysis, measurement cost, budgetary control etc. are used. .
(5) Increase in efficiency - An important feature of managerial accounting is that it does many analyzes to increase the efficiency of its organization, through this, efficiency can be increased and the current competition can be faced. Also, methods to increase efficiency can be explored.
(6) Cause and effect analysis - Under managerial accounting, the causes of problems are studied and the effects caused by these problems are also analyzed so that they can be avoided in future. For example, analyzing the profit and loss of an organization and finding out the factors affected by it.
(7) Emphasis on cost elements – The profit of any business depends on costs. If an organization has low costs, it can achieve high profits in the face of competition and survive for a long time. Many cost-related analyses are done in management accounting under which the possibility of reducing costs is ascertained.
the objective of management accounting
(1) Helping in planning and policy-making - Policy-making in relation to business and planning to achieve the desired objective is the main function of management. The management accountant presents comparative figures of previous years and projections for the future to the managers. These data are the basis of management's future policy and business planning. The management accountant also evaluates the possible effects of the management's future policies.
(2) Helpful in organization - Managerial accounting provides help in organization, budgetary control, measurement cost method, and price cost method etc.
(3) Helpful in decision-making - Managers have to make decisions at every step, although intelligence and discretion are required in making decisions, still the details and reports presented by management accounting help in decision-making to a great extent. provide.
4) Helpful in coordination - Unless there is coordination in the activities of all the departments of an organization, that organization cannot earn a good profit. Management accounting provides adequate assistance in this work. Budgetary control techniques establish coordination.
5) To help motivate employees - The objective of management accounting is to help the management in motivating the employees of the organization to work in the interests of the organization. For this, the management accountant presents many incentive plans to the management along with their outlay and profitability figures.
(6) Communication of latest information – Managerial
The purpose of accounting is to provide management with all the important financial information of the business as quickly as possible.
It has to be done. Communication of the latest information to the management is very important for making the right decisions, controlling, motivating employees, and making policies. To fulfill this objective, the management accountant presents interim reports and executive statements to the management. The most important information is presented daily.
(7) To assist in the interpretation of financial information – The objective of managerial accounting is to provide assistance to the management in the correct interpretation of various financial statements. Accounting is a technical subject and the management, which has to interpret the financial statements, generally lacks technical knowledge.
Therefore, management accounting aims to present financial statements and other financial information to the management in a non-technical manner in simple and understandable language. To fulfill this objective, the management accountant prepares a comparative statement of various financial information and displays them through dots graphs, and charts when necessary
(8) The management accounting method is an efficient method of management control to help in controlling performance. Its measurement expenditure and budgetary control techniques serve this purpose. It is only by the use of these techniques that management becomes successful in cost control and functional and departmental control. Similarly, by determining the cost centers, it becomes easier for the management to transfer rights and determine responsibilities.
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