scope of management accounting | Management Principles

Management accounting.

Management accounting is the adoption and analysis of accounting information and it's diagnosis and explanation in such a way as to assist Management.

Scope of management accounting

Management accounting is a new approach to accounting. It provide techniques for the interpretation of accounting data. It also help in Developing realistic approach to future course of action. It's main Aim is to help management in it's function of planning, directing and controlling.

Scope of management accounting

(1) Financial accounting  :  Financial accounting deals with the historical data. The revised facts about an organization is useful for planning the future course of action. Though planning is always for the future but still it has to be based on past and present data. The control aspect too is based on financial data. The performance appraisal is based on recorded fact and figures. so management Accounting is closely related to financial accounting.

(2) Cost accounting  : Cost accounting provide various technique for determining cost of manufacturing products or cost of providing services. Cost accounting also helps in finding out economical and non-economical field of production. The efficiency of different department is judge by setting up standard and finding out variance. So cost accounting is an essential part of management Accounting.

(3) Financial management  :  Financial management is concerned with the planning and Controlling of the financial resources of the firm. It deal with raising of funds and there effective utilisation it main Aim is to use Business funds in such a way that earning are maximized. Finance has become so much important for every business undertaking that all managerial activities are connected with it.

(4) Budgeting and Forecasting  :  Budgeting means expressing plans, policies and goals of enterprises for definite period in future. The target are set for different department and responsibilities  is fixed for achieving these targets. The comparison of actual performance with budgetary figure will give an idea to the management about the performance of different department. Forecasting on the other hand is a prediction of what will happen as a result of a giving set of circumstances. Forecasting is a judgement wherese budgeting is a Organisational object. Both budgeting and forecasting are useful  for management accountant in planning various activities.

(5) Inventory Control  :  Inventory is used to denote the stock of raw materials, goods in the process of manufacturing and finishing products. Inventory has a special significance in accounting for determining correct income for a given period . Inventory Control is significant as it involves large sums. Management should determine the level of stock, such as minimum level, maximum level, reordering level for inventory control. Inventory Control will be helpful for taking managerial decision.

(6) Reporting to management  :  One of the function of management accountant is to keep the management informed of various activities of the concerns so as to assist it in controlling the enterprises. The management accountant send interim reports to the management and these reports may be monthly, quarterly, half yearly.

(7) Interpretation of data  :  The management accountant interpret various financial statement to the management. These statements gives an idea about the financial and earning position of the concern. These statements may be studied in comparison to the statement of earlier period or in comparison with the statement of similar other concerns. The significant of these reports is explain to the management is a simple long way. If the statement are not properly interpreted then wrong conclusion may be drown. so interpretation is a compiling of financial statement.

(8) Control procedures and methods  : Control procedures and methods are needed to use various factors of production in a most economical ways. The studies about cast, relationship of cast and profit are useful for using Economic resources efficiently and economically.

(9) Internal Audit  : Internal audit system is necessary to judge the performance of every department. The actual performance of every department and individuals is compared with the pre- determined standard. Management is able to know deviation in performance. Internal audit help management in fixings responsibility of different individuals.

(10) Tax accounting  :  In the present complex tax system, tax planning is a important part of management Accounting. Income statement are prepared and tax liability are calculated. Tax accounting comes under the purview of management accountant duties.

(11) Office services  :  Management accountant may be required to control an office. He will be expected to deal with dated processing, filling, copying, duplicating, communicating, etc. He will also to be  Reporting about the utility of different office machine.