Functions Of Management Accounting – The basic function of management accounting is to assist the management in performing its functions effectively. The other functions of management are planning, organising, directing and controlling. Moreover, in the view of some scholars the primary objective of management accounting is to enable management to maximise profits or minimise losses. This is done through the presentation of statement in such a way that management is able to take correct policy decisions. The following are the important functions and objectives of management accounting.
Functions Of Management Accounting
1. Provides Data
2. Modifies Data
3. Analyses and Interprets Data
4. Use of Qualitative Information
5. Supplying Information to Various Levels of Management
6. To Help in Planning
7. To Help in Organising
8. To Help in Co-ordination
9. To Help in Motivation
10. To Help in Control
11. To Help in Decision Making
12. To Help in Communication
1. Provides Data : Management accounting serves as a vital source of data for management planning. The accounts and documents consist of vast quantity of data about past progress of the enterprise which are must or making forecasts for the future
2. Modifies Data: The accounting data required for managerial decisions is properly compiled and classified. For example, purchase figures for different months may be classified as product-wise, supplier-wise and territory-wise to know total purchases made during each period.
3. Analyses and Interprets Data : Management accountants present the data in a simplified way i.e. technical data are presented in a non-technical way with the help of different tools and techniques like comparative statements, common-size statement, trend analysis, ratio analysis, fund flow statement, cash flow statement etc. The management accountant gives his opinion about various alternative courses of action, so that, it can become easy for the management to take a decision.
4. Use of Qualitative Information : The field of management accounting is not restricted to the use of monetary data only. It collects and uses non-monetary information also. While preparing a production budget, management accountant may not only uses the past figures but he may also rely on the assessment of persons dealing with production, productivity reports, consumer and other business document. The use of qualitative information is as useful as monetary information.
5. Supplying Information to Various Levels of Management : Management accountant provides information to top level management for decision making and policy execution. The supply of adequate information at the proper time increases the efficiency of management.
6. To Help in Planning : Management fixes various targets to be achieved by the business in near future. It makes available the relevant data after analysing their suitability for effective planning and decision making.
7. To Help in Organising : Organisation is related to the establishment of relationship among different individuals in the concern. Management accounting is concerned with the establishment of cost centers, profit centers, Preparation of budgets, preparation of cost control accounts and fixing of responsibility for different functions. Thus, it establishes a sound business structure.
8. To Help in Co-ordination : It involves interlinking of different divisions of the business enterprise in a way so as to achieve the objectives of the organisation as a whole. Thus, perfect co- ordination is required among production, purchase, finance, personnel, sales departments etc Effective coordination is achieved through departmental budgets and report which form the basis of management accounting.
9. To Help in Motivation : Motivation invokes maintenance of a high degree of morale in the organisation. This objective is achieved only due to management accountants because they prepare periodical departmental budgets and reports.
10. To Help in Control : Through management accounting techniques such as budgetary control, standard costing etc., the standards of each unit in the organisation are fixed. The predetermined standards are compared with actual results and if there is any deviation, then responsibilities of each unit or individual are fixed.
11. To Help in Decision Making : The management has to take many decisions like introducing hnology, product mix. increasing or decreasing production capacity, dividend policies etc. While aking into consideration the profit & loss reports for making different decisions, the management ccountant chooses the best alternative among different available alternatives.
12. To Help in Communication : Management Accounting provides up-to-date informations the managers through various periodicals and reports from time to time. This timely communication of information help managers in taking the decision.