Define Management Accounting. What are its objectives?

Define Management Accounting. What are its objectives?

Management Accounting is the process of analysis, interpretation and presentation of accounting information collected with the help of financial accounting and cost accounting, in order to assist management in the process of decision making, creation of policy and day to day operation of an organization. Thus, it is clear from the above that the management accounting is based on financial accounting and cost accounting.

Following are the objectives of Management Accounting:

1) Measuring performance: Management accounting measures two types of performance. First is employee performance and the second is efficiency measurement. The actual performance is measured with the standardized performance and a report of deviation from the standard performance is reported to the management for the effective decision making and also to indicate the effectiveness of the methods in use. Both types of performance management are used to make corrective actions in order to improve performance.

2) Assess Risk: The aim of management accounting is to assess risk in order to maximize risk.

3) Allocation of Resources: is an important objective of Management Accounting.

4) Presentation of various financial statements to the Management.

What are the limitations of Management Accounting?

Limitations of Management Accounting:

1) Management Accounting is based on financial and cost accounting, in which historical data is used to make future decisions. Thus, strength and weakness of the managerial decisions are based on the strength and weakness of the accounting records.

2) Management Accounting is useful only to those people who are in the decision making process.

3) Tools and techniques used in management accounting only provide information and not ready made decision. Thus, it is only a supplementary service.

4) In Management Accounting, decision is based on the manager’s institution as management try to avoid lengthy courses of scientific decision making.

5) Personal prejudices and bias affect the decisions as the interpretation of financial information is based on personal judgment of the interpreter.
What is the scope of Management accounting?
Scope of Management Accounting - 1) Financial Accounting 2) Cost Accounting 3) Revaluation accounting 4) Control Accounting 5) Marginal Costing ......
Compare Financial Accounting and Cost Accounting.
Financial Accounting protects the interests of the outsiders dealing with the organization e.g shareholders, creditors etc.....
Financial Accounting vs. Management Accounting
Financial Accounting reports are used by outside parties such as creditors, shareholders, tax authorities etc. whereas Management Accounting reports are used by managers////
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Discussion Board
Management accounting
Thank u so much to Rajani shrma,for develope and update the page..and i am so happy for know the clear details about the mgt a/c
Alok swain 01-7-2015
management accounting and its objectives
Thanks to you for this posting, I clearly understands the role of management accounting, cost and finacial accounting.
Saka 06-26-2014
Management Accounting
Why it would assess the risk to maximize the risk I believe it is assessed so as to minimize the risks.
Piyush 04-27-2014
thanks a lot to Rajani Sharma for posting all this info.
this helped me a lot in completing my presentation..:-)
manish 09-13-2012