Advantages or Importance of Management accounting

Advantages/ needs or Importance of Management accounting

These are the following advantages of management accounting:- 

• Increase efficiency
• Proper planning
• Measurement of performance
• Maximizing profitability
• Improves service to customers
• Effective management Control

(1) Increase efficiency : Management accounting increase efficiency of the business operations. The targets of different departments are fixed in advance and achievement of these goals is a tool for measuring their efficiency.

(2) Proper planning  : Management is able to plan various operations with the help of accounting information. The techniques of budgeting is helpful in forecasting various activities. Budgeting are prepared department wise firstly and then a master budget is prepared for the whole Organizations. The work load of each and every individuals is fixed in advance. The activities of the concerns are planned in a systematic manner.

(3) Measurement of performance : The system of budgetary control and standard costing enable the measurement of performance. In standard costing, standard are determined and then actual cost is compared with standard cost. It enable the Management to find out deviation between standard cost and actual cost. Budgetary control system too help in measuring efficiency of all employees.

(4)  Maximizing profitability : The trust of various management techniques is to control cost of production and increase efficiency of each and every individuals in the Organizations. The step of controlling are able to reduce cost of production. The profit of enterprises are maximized with the help of  management accounting system.

(5) Improve service to customers : The cost Control devices employed in management accounting enable the reduction of prices. All employees in the concerns are made cost conscious. The quality of product become good because quality standard are pre determined. The customers are supplied good quality goods at reasonable price.

(6) Effective management Control  :  The tools and techniques of management accounting are helpful to the management in planning, co ordinating and controlling activities of the concerns. The setting of standard and assessing actual performance regularly enable the management to have management by exception. Everybody asses his own work and immediate action are taken in case of deviation in performance.