Management Accounting

Meaning of Management Accounting The term Management Accounting is used to describe the modern concept of accounting as a tool of management in contrast to the conventional accounts prepared to show the financial position of a business or generation. Management Accounting represents to accounting for management it provides necessary information to the management for discharging its functions. The functions of management are planning, organization, directing and controlling management. Accounting provides the required information for affection and efficient performance of these functions. Definition of Management Accounting As per Bostock, Management Accounting can be defined as the art of presenting to management such figures, whether in terms of money or other units, as will assist management to its !ob". #alter B.M. $arland is of the opinion that Management Accounting is concerned with supplying financial data useful to management at all levels in planning and administrating and enterprise. Emergence of Management accounting: #ith th radical change in the advancement of science and techinology more sophisticated equipments have been put into operation since financial accounting used to meet the aims and ob!ectives of the outsiders%share holders, debenture holders, creditors etc.&. this has necessitated a change into accounting from a mere device of recording the business events to a powerful tool of forecasting, budgeting, budgetary control, Analysis and interpretation. 'recisely, it has led to emergence of Management accounting. (nly Management accounting is a powerful instrument of forecasting, planning, regulating business activities as a whole and taking decisions. Characteristics of Management accounting ). *ts nature is selective type+ Management accounting does not use the whole data taken from financial statements. *t selects and picks up only the relevant data from the financial records such as Balance sheet and ' , - A.c. /. *ts concerns with future+ *t collects and analyses information which helps in planning and decision making for future. There decisions are required for the future course of action. 0. *t modifies analysis and interprets data+ (n the basis of post data the pro!ection and estimation are made by analyzing and interpreting the post data. Management Accounting helps in directing the efforts towards control of the destiny of and organization. 1. *t provides only information and not decision+ Management accounting makes available useful information which assist in planning and decision making. 2. *t studies the relationship between causes and efforts+ the financial statements do not analyze and interpret the causes which make 'rofit or -oss in the business however Management accounting attempts to study the cause and effect

relationship by analyzing the various variables officiating the results of the business activity and profitability of the firm. 3. Management accounting has no specific set of rules like financial accounting+ while financial accounting has certain principles and rules Management accounting has no specific set of principles. 4. *t focuses attention towards nature of cost elements+ it pays attention towards various elements of cost. *t divides cost into fi5ed semi variable and variable to assist the management in decision making. Scope of Management accounting: The important aspect of Management is to take decision and make plans and policies. $or this purpose it requires several financial and non6financial informations which may affect its policies. 7ue to this Management accounting has to serve management in a broader form. *t includes not only presentation of accounting data but financial analysis and interpretation of business operations also. ). $inancial Accounting+ *t includes recording classifying and summarizing the day to day business transactions in a significant way in terms of money. 8o this accounting of historical data, forms the basis of planning and forecasting. /. 9ost accounting+9ost accounting is another brach account which helps Management accounting is giving various information of cost. 9ost accounting is the method of ascertaining cost. *t includes marginal costing, standard costing etc. 0. 9ost control procedure+ the include control devices i.e. inventory control, cost control, time control, budgetary control etc. these control procedures also help in converting a budget into an operating plan. 1. 9ost and statistics+ Management accounting includes statistics as it necessarily requires with the supply of statistical data. 2. $orecasting and budgeting+ Budgeting and forecasting A:; T<; =*TA- 'A:T ($ MA>A?;M;>T A99(@>T*>?. *T *>=(-=;8 the preparation of budgets and compare the actual results from the budgeted performance. 3. Ta5ation+ this requires the computation of income ta5 on business income as per the rules laid down in incometa5 act and to file the return and to make ta5 payment ta5ation is an important aspect of Management accounting. 4. Method and procedure+ Management accounting is closely associated with the economical methods, procedure and system of accounting being suited to the business undertaking. *t includes latest computer and other electronic devices. The devices reduce the cost and improve the efficiency of accounting system. A. :eporting+ :eporting may be internal or e5ternal. *nternal reporting is concerned with the top management while e5ternal reporting to the outside world. These reports are presented before the top management monthly, quarterly, half yearly or annually. B. *nternal $inancial 9ontrol+ it includes internal audit, internal cheque and efficient office management. )C. (ffice 8ervices+ The office services include data processing, duplication printings, mails, communication, providing stationery etc.

Tools and Techniques of Management Accounting: Management accounting