Functions of Management Accounting
The basic function of management accounting is to assist the management in performing its functions effectively. The functions of management are planning, organizing, directing, and controlling. Provides data
Management accounting serves as a vital source of data for management planning. The accounts and documents are a repository of a vast quantity of data about the past progress of the enterprise, which is a must for making forecasts for the future.
Modifies data
Management accounting modifies the available accounting data rearranging in such a way that it becomes useful for management.
The modification of data in similar groups makes the data more useful and understandable. The accounting data required for management decisions is properly compiled and classifies.
For example, purchase figures for different months may be classified to know total purchases made during each period product-wise, supplier-wise, and territory-wise.
Communication
Management accounting is an important medium of communication. Different levels of management (top, middle, and lower) need different types of information.
The top management needs concise information at relatively long intervals, middle management needs information regularly, and lower management is interested in detailed information at short-intervals.
Management accounting establishes communication within the organization and with the outside world.
Analyses and interprets data
The accounting data is analyzed meaningfully for effective planning and decision-making. For this purpose, the data is presented in a comparative form, Ratios are calculated, and likely trends are projected.
Serves as a means of communicating
Management accounting provides a means of communicating management plans upward, downward, and outward through the organization.
Initially, it means identifying the feasibility and consistency of the various segments of the plan. The later stages it keeps all parties informed about the plans they have been agreed upon and their roles in these plans.
Facilitates control
Management accounting helps in translating given objectives and strategy into specified goals for attainment t by a specified time and secures the effective accomplishment of these goals efficiently. All this is made possible through budgetary control and standard costing, which is an integral part of management accounting.
Uses also qualitative information
Management accounting does not restrict itself to financial data for helping the management in decision making but also uses such information that may be capable of being measured in monetary terms. Such information may be collected from special surveys, statistical compilations, engineering records, etc.
To assist in planning.
Management Accounting assists the management in planning as well as to formulate policies by making forecasts about the production, selling the inflow and outflow of cash, etc.
Not only that, but it may also forecast how much may be needed from alternative courses of action or the expected rate of return from that place and at the same time decides upon the programmed of activities to be undertaken.
To assist in organizing.
By preparing budgets and ascertaining specific cost centers, it delivers the resources to each center and delegates the respective responsibilities to ensure their proper utilization.
As a result, an interrelationship grows among the different parts of the enterprise.
Decision-Making
Management accounting furnishes accounting data and statistical information required for the decision-making process, which vitally affects the survival and the s
Management accounting supplies analytical information regarding various alternatives, and the choice of management is made easy.
To assist in motivation.
By setting goals, planning the best and economic courses of action, and also by measuring the performances of the employees, it tries to increase their efficiency and, ultimately, motivate the organization as a whole.
To Coordinate
It helps the management in coordination the whole activities of the enterprise, firstly by preparing the functional budgets, then co-coordinating the whole activities of the enterprise, firstly, by preparing the functional budgets, then co-coordinating the whole activities by integrating all functional budgets into one which goes by the name of ‘Master Budget.’
In this way, it helps the management by con-coordinating the different parts of the enterprise. Besides, overall coordination is not at all possible without budgetary control.’
To Control
The actual work done can be compared with ‘Standards’ to enable the management to control the performances effectively.
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