Tuesday 29 January 2013

3 Meaning and Functions of Management Accounting Detailed study report

Management Accounting

Management accounting is the process of assist in management for doing the managerial activities more efficiently and effectively. It is concerned with the accounting information which will be used for proper functioning of management.

The American Accounting Association defines "Management accounting is the application of appropriate techniques and concepts in processing historical and projected economic data of any entity to assist management in establishing plans for reasonable economic objectives in the making of rational decisions with a view towards these objectives".

The management accounting provides the managerial information to the managers of the concerned organization which helps them to work effectively according to the accounting information available in the right time. This information is the base for planning and decision making for the future course of business.


Scope of Management Accounting:

The purpose of management accounting is to provide adequate information to the business. For this, they are collecting qualitative and quantitative information from the accounting as well as non-accounting areas and submit to the managers. The following are the major scope of management accounting.


  1. Financial Accounting - Management accounting is highly depends on the financial accounting because the arrangement of financial data is one of the main function of management accounting.
  2. Cost Accounting - Cost accounting is a process which provides necessary information like standard costing, budgetary control, inventory control etc. these all data helps to co-ordinate the basic managerial functions like planning, decision making, controlling and other important activities for the future course of actions.
  3. Operations Research - Now a days the business managers are handling complicated functions in the business activities. This is helps to identify some basic tools of Linear programming, queuing theory, decision theory etc and which will help the managers to do their activities properly in the current complicated business scenario.
  4. Statistical Methods- The planning and forecasting of the business activities are very important aspect in the course of business activity. These planning and forecasting can be done with the use of statistical tools such as graph, charts, diagrams, index numbers, time series, regression analysis, sampling techniques etc.
  5. Revaluation Accounting- This is mainly concentrate to ensuring the capital is maintained in real terms and the profit is calculated on that basis. The revaluation method is also known as the replacement value method.
  6. Taxation- Taxation is an unavoidable aspect in the current business scenario. The taxation includes tax planning, computation of tax, filing of returns and making tax payments.
  7. Office Services- The office services includes maintenance of proper data processing, communication to the concerned parties, use of technical services and the use of all other managerial services.
  8. Law- All the management decisions are taken with the help of legal environment. The following are the acts which influence the management decisions such as The companies Act, MRTP Act, FEMA, SEBI Regulations etc.
  9. Internal Audit- This is done for the development of the internal control of the business activities.
  10. Internal Reporting- Reporting is the very important action in any course of business. This can be  categorized as the preparation of quarterly report, half yearly report, other interim reports, Scrap reports, Cash flow statements, Fund flow statements, income statements etc.
These all are the functions of management accounting for the smooth running of a business organization.



3 comments:

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