In this topic we will cover the Management Accounting: meaning , definition and scope which is useful for every organisation whether it is profit or non profit . and useful for the commerce and management students.
Management Accounting: Meaning, Definition and Scope
The term Management Accounting was first used by the
<strong><em><b><i> British Team of Accountants</i></b></em></strong> that visited U.S.A. under the sponsorship of the Anglo American Productivity Council in 1950 with a view to highlight utility of accounting as an
<strong><b>Effective Management Tool. The term Management Accounting comprises of two terms .I.e. Management and Accounting i.e. Accounts which increase managerial efficiency or providing all those information and facts which are necessary for managers.
Management accounting is the process of preparing reports about business operations that help managers make short term and long term decisions. It helps a business pursue its goals by identifying, measuring, analyzing, interpreting and communicating information to managers.
Definition of Management Accounting
“A management accounting is concerned with accounting information that is useful to management.” – Robert N. Anthony
“Management accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and in day to day operations of an undertaking”.
-Anglo American Council on Productivity
“Management accounting is the provision of information required by management for such purposes as formulation of policies, planning and controlling the activities of the enterprise, decision making on the alternative courses of action, disclosure to those external to the entity(shareholders and others), disclosure to employees and safeguarding of assets”. – CIMA London
From the above it is clear that management accounting uses all techniques of financial accounting, cost accounting and statistics to collect and process data for making it available to management so that it can take decisions in a scientific manner.
Scope of Management Accounting
Following field of activities are included in the scope of this subject:
- Financial accounting:Financial accounting though provides historical information but is very useful for future planning and forecasting. Designing of a proper financial accounting system is a must for obtaining full control and coordination of operations of the business
- Cost accounting:It provides various techniques of costing like marginal costing, standard costing, differential costing, opportunity cost analysis etc.which play a vital role in the operation and control of the business undertaking.
- Budgeting and forecasting: Forecasting on the various aspects of the business is necessary for budgeting. Budgetary control controls the activities of the business through the operations of budget by comparing the actual with the budgeted figures, finding out the deviations, analysing the responsibility and take remedial action so that adverse things may not happen in future
- Cost control procedures: These procedures are integral part of the management accounting process and includes inventory control, cost control, budgetary control, and variance analysis, etc.
- Reporting: The management accountant is required to submit reports to the management on the various aspects of the undertaking.while reporting , he may use statistical tools for presentation of information as graphs , charts , pictorial presentation, index numbers and other devices in order to make the information more impressive and intelligent.
- Methods and procedures: It includes in its study all methods and procedures which help the concern to use its resources in the most efficient and economical manner. It undertakes special cost studies and estimations and reports on cost volume profit relationship under changing circumstances.
- Tax Accounting: It includes preparation of income statement, determination of taxable income and filling up the return of income etc.
- Internal financial control: Management Accounting includes the internal control methods like internal audit, efficient office management, etc.
- Interpretations:Management Accounting is closely related to the interpretation of the financial data to the management and advising them on decision making.
- Office services:The management accountant may be required to maintain and control office services in some organizations. This function includes data processing, reporting on best use of mechanical and electronic devices, communication,etc.
- Evaluating the performance of the management: Management Accounting provides methods and techniques for evaluating the performance of the management. It evaluates the performance of the management in the light of the organization. It helps in the implementation of management by exception.
It, therefore, can be said that management accounting services not only as a tool in the hands of the management for evaluation;the performance of its subordinates , but also provides methods and techniques for evaluating the performance of the management itself.