Objectives of Management Accounting

The primary objective of management accounting is to enable management to maximize profit or minimize losses. This is done through the presentation of statements in such a way that management is able to take correct policy decision.

Followings are the important Objectives of management accounting :

(1) Planning and policy formulation : The object of Management accounting is to supply necessary data to the management for formulating plans. Planning is essentially related to taking decision for future. It also includes forecasting, setting goals and deciding alternative course of action. Management Accountant prepared statements of past results and gives his preference for a particular alternative. The figures supplied and opinion given by the management accountant help management in planning and policy formulation.

(2) Helpful in controlling performance : Management accounting devices like standard costing and budgetary control are helpful in controlling performance. The work is divided into different units and separate goals are set up for each unit. The performance of every unit is made the responsibility of a popular person. The required authority for getting the work done is also delegated to the concerned person. The actual results are compared with predetermined objectives. The management is able to find out the deviation and take necessary corrective measures. Different department heads are associated with preparing budgets and setting up goals. The management accountant act as a Co-ordinating link between different department and he also monitor their performance to the top management. Management is able to control performance of each and every individual with the help of management accounting devices.

(3) Helpful in Organizing : Organizations is related to the establishment of relationship among different individuals in the concern. It also includes the delegation of authority and fixing of responsibility. Management accounting is connected with the establishment of cost centers, Preparation of budgets, preparation of cost Control accounts and fixing responsibility for different functions. All these aspects are helpful in setting up an effective and efficient organisational framework.

(4) Helpful in interpreting financial information : The main objective of management accounting is to present financial information to the management in such a way that it is easily understood. Financial information is of a technical nature and managerial personnel may not be able to understand the significance and utility of various financial statements. Management Accountant explains these statements to the management in a simple language. If necessary he uses statistical devices like chart, diagrams, index etc. so that the information is easily followed.

(5) Motivating employees : Management accounting helps the management in selecting best alternatives of doing the things. Targets are laid down for the employees. They feel motivated in achieving their targets and future incentive may be given for improving their performance.

(6) Helpful in making decisions : The management has to take certain important decisions. A decision may have to be taken about the expansion or diversification of production. There may be question of replacement of labour with machines or Introduction latest technological devices. Management accountant prepares a report on the feasibility of various alternatives and makes an assessment of their financial implications. The information provided by the accountant helps management in selecting a suitable alternative and taking correct decision.

(7) Reporting to management : One of the primary objective of management accounting is to keep management fully informed through regular financial and other reports. The performance of various departments is also regularly communicated to the top management.

(8) Helpful in Co ordination : Management accounting provides tools which are helpful in Co-ordinating activities of different sections or departments. Co ordination is done through functional budgeting. Management Accountant act as a coordinator and reconciles the activities of different sections.

(9) Helpful in Tax administration : The complexity of tax system are increasing every day. Management accounting helps in assessing various tax liabilities and depositing the correct amount of taxes with the Concerned authorities. Various tax returns are to be filled under different tax laws. Tax administration is carried on with the advice and guidance of the management accountant.