Management Accounting

Management accounting covers all those services by which the accounting department can assist the management of business enterprise in formulation of policies, taking decision, control and execution and appreciation of effectiveness.

Management accounting doesn’t provide only meaningful accounting information to the various levels of management to enable them to be well informed and equip them with analytical and measurable tools. It ensures the effective and profitable utilization of monetary and non-monetary resources of organization. Management accounting incorporates planning about what should be do, how it should be done and when it should be done. It involves forecasting on the basis of available information, setting goals, framing policies, determining alternative course of action and deciding on the program of activities to be done. Management accounting assess in the following ways:

1. Management accounting serves as a vital source of data for management planning.rn2. The accounting data required for managerial decisions is properly compiled and classified.rn3. It makes available to the management relevant accounting costing and other statistical data for use if the process of planning and decision making.rn4. It analysis and presents the financial implication of alternative course of action and the effect of these on the profitability of the concern.rn5. It provides means of communication.Management plans to the various levels of organization. It ensures the coordination of various segments in the whole plan and assist the managers in directing their activities.rn6. Management accounting measures actual performance against operating plans, standards and budgets with a view to interpret the results of operations to the concerned head of responsibility centers and managers at higher rnlevels. This enables the manager in controlling function by indication the significant deviations between actual and expected activities and by adhering to the principles of selectivity.rn7. Management accounting provides the methods of techniques for evaluating the performance of the management in the light of the objectives of the organization.

The management accounting assists the management on the formulation of policies and in planning and control of the operation of the undertaking. Management accounting provides following services:

1. It increases the efficiency of various business functions.rn2. It has eliminated the element of intuition from business decisions and extended the use of accounting services to the management.rn3. Different tools of management accounting have provided validity, objectivity and reliability in business management.rn4. Planning, forecasting and budgeting have protected business entities from business fluctuations and various types of risk.rn5. Different techniques of management accounting help in control of various business operations. The maximum utilization of capital and maximum return on capital invested in business becomes feasible through the application of accounting techniques.rn6. It brings about improves customer relationship and promote labor management relationship.rn7. It helps in interpretation of financial information and assist in controlling the performance of business.rn8. Management accounting assists in coordination operations and motivating employees.rn9. Last but not the least management accounting helps in communication up to date information to various parties interested in successful working of organization.