Functions Of Management Accounting:
The functions of management accounting may be said to include all activities connected with collecting, processing, interpreting and presenting information to management. The Management Accounting satisfies the various needs of management for arriving at appropriate business decisions. They may be described as follows:
1. Modification of Data:
Accounting data required for decision – making purposes is supplied by management accounting through resort to a process of classification and combination which enables to retrain similarities of details without eliminating the dissimilarities (e.g.) combination of purchases for different months and their breakup according to class of product, type of suppliers, days of purchase, territories etc.
2. Analysis & Interpretation of Data:
The data becomes more meaningful with the analysis and interpretation. For example, when Profit and Loss account and Balance Sheet data are analyzed by means of comparative statements, ratios and percentages, cash-flow-statements, it will open up new directions for its use by management.
3. Facilitating Management Control
Management Accounting enables all accounting efforts to be directed towards control of destiny of an enterprise. The essential features in any system of control are the standards for performance and measure of deviation therefrom. This is made possible through budgetary control and standards costing which are an integral part of Management Accounting.
4. Formulation of Business Budgets:
One of the primary functions of management is planning. It is done by Management Accounting through the process of budgeting. It involves the setting up of objectives, and the selection of the most appropriate strategies by comparing them with reference to some discriminating criteria. Probability, Probability, forecasting, and trends are some of the techniques used for this purpose.
5. Use of Qualitative Information:
Management Accounting draws upon sources, other than accounting, for such information as is not capable of being readily convertible into monetary terms. Statistical compilations, engineering records and minutes of meeting are a few such sources of information.
6. Satisfaction of Informational Needs of Levels of Management:
It serves management as a whole according to its requirements it serves top middle and lower level managerial needs to subserve their respective needs. For instance it has a system of processing accounting data in a way that yields concise information covering the entire field of business activities at relatively long intervals for the top management, technical data for specialized personnel regularly and detailed figures relating to a particular sphere of activity at short intervals for those at lower rungs of organizational ladder.
The gist of Management Accounting can be expressed thus, it is a part of over all managerial activity – not something grafted on to it from outside – guiding and servicing management as a body, to derive the best return form its resources, both the itself and for the super system within which it functions.
From the above discussions, one may come to the following conclusions about the fundamental approach in Management Accounting.
Firstly, the Management Accounting functions is a managerial activity and it puts its finger in very pie without itself making them it guides and aids setting of objectives, planning coordinating, controlling etc. But it does not itself perform these functions.
Secondly it serves management as a whole – top middle and lower level – according to its requirements. But in doing so it never fails in keeping in focus the macro-approach to the business as a whole.
Thirdly, it brings in the concept of cost-Benefits analysis. The basic approach is to split all costs and benefits into two groups – measurable and non measurable. It is easy to deal with measurable costs which are expressed in terms of money. But there are several ventures such as office canteens where the cost-benefits may not be monetarily measurable.
4 Comments